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when foreign buyers are

charged lower prices than domestic

buyers for an identical product, after allowing for transportation costs and

tariff duties

domestic currency and that nations most important trading partners, with weights given by relative importance of the nations trade with each trade partner

or bank deposits) or to domestic savers investing in foreign assets

exchange rate

the price of one


in terms of another

dynamic comparative advantage changing pattern in comparative



governments can establish

policies to promote opportunities


effective tariff rate

measures the

total increase in domestic


that a tariff makes possible, to free trade


exchange rate pass-through


the extent to which

changing currency values lead to

changes in import and export prices

changes in comparative advantage over time

dynamic effects of economic integra-


effects that relate to member

nationslong-term rates of growth,

which include economies

of scale,

greater competition, stimulus

and investment

dynamic gains from international


the effect of trade

on the

countrys growth rate and thus on the volume of additional resources made available to, or utilized by, the trading

elasticity approach

an approach to

currency depreciation that emphasizes the relative price effects of depreciation

and suggests that depreciation works best when demand elasticities for a nations imports and exports are high

escape clause

allows the president to

temporarily terminate or make modi- fications in trade concessions granted foreign nations and to temporarily levy

restrictions on surging imports


the official currency of the EMU

exchange-rate index

a weighted

average of the exchange rates between a domestic currency and that nations most important trading partners, with weights given by relative importance of

the nations trade with each trade partner

exchange-stabilization fund

a gov-

ernment entity that attempts to ensure that the market exchange rate does not

move above or below the official exchange rate through purchases and sales of foreign currencies



economic integration

a process of

eliminating restrictions on interna- tional trade, payments, and factor mobility

economic interdependence


aspects of a nation s economy


linked to the economies partners

of its trading

economic mandated

sanctions government- limitations placed on cus-

tomary trade or financial relations among nations

economic union

where national,

eurodollar market a market that operates as a financial intermediary, bringing together lenders and bor- rowers; also called the eurocurrency market

European Monetary Union (EMU) the countries of Europe that in 1999 abolished their national currencies and central banks and replaced them with the euro and the European Central


European Union (EU)

a trading

bloc that replaced the European Community following ratification of the Maastricht Treaty by the 12 member countries of the European Community

exit barriers

cost conditions that

make lengthy industry

exit a rational


by companies

expenditure-changing policies policies that alter the level of aggregate demand for goods and services, including those produced domestically and those imported

expenditure-switching policies policies that modify the direction of demand, shifting it between domestic output and imports

export controls

enacted to stabilize

export revenues, these measures offset a decrease in the market demand for the

primary commodity by assigning cut- backs in the market supply

social, taxation, and fiscal

policies are

harmonized and administered supranational institution

by a

economies of scale

when increasing

all inputs by the same proportion results in a greater proportion of total


exchange arbitrage

the simultaneous

purchase and sale of a currency in dif-

ferent foreign-exchange markets in order to profit from exchange-rate differentials in the two locations

exchange controls



barriers to foreign


export quotas

limitations on export

sales administered by one or more exporting nations or industries

export subsidy

a subsidy paid to

exporters so they can sell goods abroad at the lower world price but still receive

the higher support price

effective exchange rate

a weighted

average of the exchange rates between a


in domestic assets (for


government securities,


Export-Import Bank (Eximbank) independent agency of the U.S.


Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

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