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Glossary

nations of the United Nations that met at Bretton Woods, New Hampshire

buffer stock

supplies of a commodity

financed and held by a producersassociation; used to limit commodity price swings

buy-national policies

when a home

n a t i o n s g o v e r n m e n t ,

through

explicit

laws, openly discriminates against foreign suppliers in its purchasing decisions

maintain identical governmental agri- cultural policies to support farmers

common market a group of trading nations that permits the free movement of goods and services among member nations, the initiation of common external trade restrictions against non- members, and the free movement of factors of production across national borders within the economic bloc

community indifference curve

the

monetary union; in the instance of the Maastricht Treaty, these standards included price stability, low long-term interest rates, stable exchange rates, and sound public finances

corporate average fuel economy

standards (CAFE)

fuel

economy

standards imposed by the U.S. government on automobile manufacturers

cost-based definition of dumping

a

indifference

curve that represents

the

method of calculating

the fair market

C

tastes and preferences of all of the households of a nation

value of a product in dumping cases;

the U.S. Commerce Department

con-

call option gives the holder the right to buy foreign currency at a specified price

capital and financial account

the net

result of both private-sector and official

capital and financial transactions

complete specialization

a situation

in which a country produces only one

good

compound tariff

a tariff that is a

combination

of a specific tariff and an

ad valorem tariff

structsfair market

value equal to the

sum of (1) the cost of manufacturing

the merchandise,

(2) general expenses,

(3) profit on home-market sales, and (4) the cost of packaging the merchandise for shipment to the United States

capital controls imposed barriers

government- to foreign savers

investing in domestic assets or to

domestic savers investing

in foreign

assets; also known as exchange controls

capital/labor ratio

a countrys ratio

conditionality

the standards imposed

by the IMF on borrowing countries to qualify for a loan, which can include requirements that the borrowers initiate programs to correct economic difficul- ties, adopt austerity programs to shore

cost-insurance-freight (CIF)

valuation

when ad valorem tariffs

are levied as a percentage

of the

imported

commoditys total value as it

arrives at its final

destination

countervailing

duty

a levy imposed

of capital inputs to labor inputs

carry trade row and pay

It occurs when you bor- interest in order to buy

something else that has higher

interest

cartel

a group of firms or nations that

attempts to support prices higher than

would exist under more competitive conditions

clean float

when free-market forces

of supply and demand are allowed to

determine the exchange value of a currency

Commodity Credit Corporation

(CCC)

a government-owned

corporation administered by the U.S. Department of Agriculture

commodity terms of trade

measures

the relation between the prices a nation

gets for its exports and the prices it pays for its imports

common agricultural policy mem- bers of the European Union agree to

up their economies, and put their muddled finances in order

conglomerate diversification

in the

case of an MNE, diversification nonrelated markets

into

constant opportunity costs

a con-

stant rate of

sacrifice of one good for

another as a nation slides along its production possibilities schedule

consumer surplus

the difference

between the amount that buyers would

be willing and able to pay for a good and the actual amount they do pay

consumption effect

a trade restric-

tions loss of welfare that

occurs

because of increased prices

and lower

consumption consumption gains

post-trade con-

s u m p t i o n p o i n t s o u t s i d e a n a t i o n production possibilities schedule s

convergence criteria standards required of

economic all nations in a

by importing countries

to counteract

foreign export subsidies; the size of the

duty is limited to the amount of the export subsidy

country risk risk associated with political developments in a country, especially the governments views concerning international investments and loans

country risk analysis

a process that

multinational

corporations and banks

carry out to help them decide whether

to do business

abroad

covered interest arbitrage

the

process

of moving funds into foreign

currencies

to take advantage of higher

investment yields abroad, while avoiding exchange rate risk

crawling peg a system in which a nation makes small, frequent changes in the par value of its currency to correct balance-of-payments disequilibriums

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