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the base currency and the domestic currency is the quote currency

industrial policy

government policy

that is actively involved in creating

comparative advantage infant-industry argument

a tariff

that temporarily shields newly devel- oping industries from foreign competition

established by two or more companies combines their skills and assets

International Monetary Fund (IMF) headquartered in Washington, and consisting of 184 nations, the IMF can be thought of as a bank for the central banks of member nations

International Monetary Market


an extension of the com-

key currency

a currency that is

widely traded on world money markets, has demonstrated relatively stable values over time, and has been widely

accepted as a means of international settlement


labor mobility

a measure of how

intellectual property rights (IPRs) the exclusive rights to use an invention, idea, product, or process for a given time awarded to the inventor (or author) through registration with the government of that invention, idea, product, or process

interbank market bank transactions with other banks

interest arbitrage

the process of

moving funds into foreign currencies to

take advantage of higher investment yields abroad

interindustry specialization


each nation specializes in a particular industry in which it enjoys a compar-

ative advantage

interindustry trade

the exchange

between nations of products ent industries

of differ-

internal balance the goal of eco- nomic stability at full employment

modity futures markets in which spe-

cific quantities of wheat, corn, and

other commodities are bought and sold for future delivery at specific dates; the IMM provides trading facilities for the purchase and sale for future delivery of

financial instruments (such as foreign currencies) and precious metals (such as gold)

international reserves assets held to enable nations to finance disequilib- rium in their balance-of-payments positions




focus on the production of particular

products or groups of products within a

given industry intra-industry trade

two-way trade

in a similar commodity


J-curve effect

a popular description

labor migration responds to wage differentials

labor theory of value

the cost or price

of a good depends exclusively upon the amount of labor required to produce it

large nation

an importing nation

that is large enough so that changes in the quantity of its imports, by means of

tariff policy, influence the world price

of the product law of comparative advantage


each nation specializes in the produc- tion of that good in which it has a relative advantage, the total output of each good increases; thus, all countries can realize welfare gains

law of one price part of the purchasing-power-parity approach to determining exchange rates; asserts that identical goods should cost the same in all nations, assuming that it is costless to ship goods between nations and there are no barriers to trade


commodity agreements


agreements between leading,

producing and consuming nations of commodities about matters such as stabilizing prices, assuring adequate supplies to consumers, and promoting

the economic development of producers

international economic-policy coor-


the attempt

to coordinate


policiesmonetary, fiscal, or

exchange-rate policyin recognition of

of the time path of trade flows that

suggests that in the very short term, a currency depreciation will lead to a worsening of the nations trade balance,

but as time passes, the trade balance will likely improve

judgmental forecasts

subjective or

common-sense exchange rate forecasts based on economic, political, and other

data for a country

leaning against the wind


to reduce short-term fluctuations in exchange rates without attempting to adhere to any particular rate over the long term



the phenomenon


exports being less capital intensive


import-competing goods

level playing field

a condition in

which domestic and

foreign producers

can compete on equal terms

international economic interdependence

international joint ventures



of multinational enterprise

in which a business organization


Kennedy Round

round of trade

negotiations named after U.S. President John F. Kennedy between GATT members during the period 19641967

license on demand allocation

a sys-

tem in which licenses are required to import at the within-quota tariff

limit order

an order to buy or sell at

a specified price or better

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