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Exam Study Guide final exam psci 150

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Comparative advantage

The ability of a country or firm to produce a particular good or service more efficiently than other goods or services, such that its resources are most efficiently employed in this activity. The comparison is to the efficiency of other economic activities the actor might undertake, not to the efficiency of other countries or firms.

Absolute advantage

The ability of a country or firm to produce more of a particular good or service than other countries or firms using the same amount of effort and resources.

Heckscher-Ohlin trade theory

The theory that a country will export goods that make intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make intensive use of labor,(p.270).


The imposition of barriers to restrict imports. Commonly used protectionist devices including tariffs, quantitative restrictions (quotas), import licenses, requirements that governments only buy domestically produced goods, and health and safety standards that discriminate against foreign goods.

Trade barriers

Any government limitation on the international exchange of goods. Examples include tariffs, quantitative restrictions (quotas), import licenses, requirements that governments only buy domestically produced goods, and health and safety standards that discriminate against foreign goods.


this raises the domestic price of the imported good and may be applied for the purpose of protecting domestic producers from foreign competition.

Quantitative restriction (quota)

Quantitative limit placed on the import of particular goods.

Nontariff barriers to trade

and other measures that discriminate against foreign goods or services.

Stolper-Samuelson theorem

if a country imports goods that make intensive use of its scarce factor, then limiting imports will help that factor. So in a labor-scarce country, labor benefits from protection and loses from trade liberalization (p. 279).

Ricardo-Viner (specific-factors) model

A model of trade relations that emphasizes the sector in which factors of production are employed rather than the nature of the factor itself. This differentiates it from the Heckscher-Ohlin approach, for which the nature of the factor - labor, land, capital - is the principal consideration (p. 280).


In international trade relations, a mutual agreement to lower tariffs and other barriers to trade. Reciprocity involves an implicit or explicit arrangement for one government to exchange trade policy concessions with another.

Most favored nation (MFN) status

A status established by most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms offered in agreements with third parties.

World Trade Organization (WTO)

An institution created in 1995 to succeed the GATT and to govern international trade relations. The WTO encourages and polices the multilateral reduction of barriers to trade, and it oversees the resolution of trade disputes.

General Agreement on Tariffs and Trade (GATT)

An international institution created in 1947 in which member countries committed to reduce barriers to trade and to provide similar trading conditions to all other members. In 1995, the GATT was replaced by the WTO.

Regional trade agreements (RTAs)

Agreements among three or more countries in a region to reduce barriers to trade among themselves.

Portfolio investments

Investments in a foreign country via the purchase of stocks (equities), bods, or other financial instruments. Portfolio investors do not exercise managerial control of the foreign operation.

Sovereign lending

Loans from private financial institutions in one country to sovereign governments in other countries.

Foreign direct investment (FDI)

Investment in a foreign country via the acquisition of a local facility or the establishment of a new facility. Direct investors maintain managerial control of the foreign operation.

World Bank

An important international institution that provides loans at below-market interest rates to developing countries, typically to enable them to carry out development projects.


A sharp slowdown in the rate of economic growth and economic activity.


and sustained high unemployment.


To fail to make payments on a debt.


The application of policies to reduce consumption, typically by cutting government spending, raising taxes, and restricting wages.

Bank for International Settlements (BIS)

One of the oldest international financial organizations, created in 1930, its members include the world's principal central banks, and under its auspices they attempt to cooperate in the financial realm.

International Monetary Fund (IMF)

A major international economic that was established in 1944 to manage international monetary relations and that has gradually reoriented itself to focus on the international financial system, especially debt and currency issues.

Multinational corporation

An enterprise that operates in a number of countries, with production or service facilities outside its country of origin.

Bilateral investment treaty

An agreement between two countries about the conditions for private investment across borders. Most BITs include provisions to protect an investment from government discrimination or expropriation without compensation, as well as establishing mechanisms to resolve disputes.

Exchange rate

The price at which one currency is exchanged for another.


In terms of a currency, to increase in value in terms of other currencies.


In terms of a currency, to decrease in value in terms of other currencies.


To reduce the value of one currency in terms of other currencies.

Monetary policy

An important tool of national governments to influence broad macroeconomic conditions such as unemployment, inflation, and economic growth. Typically, governments alter their monetary policies by changing national interest rates or exchange rates.

Central bank

The institution that regulates monetary conditions in an economy, typically by affecting interest rates and the quantity of money in circulation.

Fixed exchange rate

An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold.

Gold standard

The monetary system that prevailed between about 1870 and 1914, in which countries tied their currencies to gold at a legally fixed price.

Floating exchange rate

An exchange rate policy under which a government permits its currency to be traded on the open market without direct government control or intervention.

Bretton Woods monetary system

The monetary order negotiated among the World War II allies in 1944, which lasted until the 1970s and which was based on a U.S. dollar tied to gold. Other currencies were fixed to the dollar but were permitted to adjust their exchange rates.

Adjustable peg

A monetary system of fixed but adjustable rates. Governments are expected to keep their currencies fixed for extensive periods but are permitted to adjust the exchange rate from time to time as economic conditions change.

International monetary regime

the agreement is shared by most countries in the world economy.

Less developed countries (LDCs)

Countries at a relatively low level of economic development.


Basic structures necessary for social activity, such as transportation and telecommunications networks, and power and water supply.

Primary products

Raw materials and agricultural products, typically unprocessed or only slightly processed. The primary sectors are distinguished from secondary sectors (industry) and tertiary sectors (services).


Characterizing an industry whose markets are dominated by a few firms.

Terms of trade

The relationship between a country's export prices and its import prices.

Import substituting industrialization

A set of policies, pursued by most developing countries from the 1930s through the 1980s, to reduce imports and encourage domestic manufacturing, often through trade barriers, subsidies to manufacturing, and state ownership of basic industries.

Export oriented industrialization

A set of policies, originally pursued starting in the late 1960s by several East Asian countries, to spur manufacturing for export, often through subsidies and incentives for export production.

Washington consensus

An array of policy recommendations generally advocated by developed -country economists and policy makers starting in the 1980s, including trade liberalization, privatization, openness to foreign investment, and restrictive monetary and fiscal policies, (p. 410).

Group of 77

it has grown to over 130 members but maintains the original name.

New International Economic Order

A reorganization of the management of the international economy demanded by LDCs in the 1970s in order to make it more favorable to developing nations.

Commodity cartels

Associations of producers of commodities (raw materials and agricultural products) that restrict world supply and thereby cause the price of the goods to rise.

International law

A body of rules that binds states and other agents in world politics and is considered to have the status of law.

Customary international law

International law that usually develops slowly, over time, as states recognize practices as appropriate and correct.


The degree to which states are legally bound by an international rule. High-obligation rules must be performed in good faith and, if breeched, require reparations to the injured party.


The degree to which international legal obligations are fully specified. More precise rules narrow the scope for reasonable interpretation.


The degree to which third parties, such as courts, arbitrators, or mediators, are given authority to implement, interpret, and apply international legal rules, to resolve disputes over the rules, or to make additional rules.


norms define what actions are "right" or appropriate under particular circumstances.

Norms entrepreneurs

Individuals and groups who seek to advance principled standards of behavior for states and other actors.

Transnational advocacy networks (TAN)

A set of individuals and nongovernmental organizations acting in pursuit of a normative objective.

Norms life cycle

A three-stage model of how norms diffuse within a population and achieve a "taken-for-granted" status.

Boomerang model

A process through which NGOs in one state are able to activate transnational linkages to bring pressure from other states on their own governments.

Human rights

The rights possessed by all individuals by virtue of being human, regardless of their status as citizens of particular states or members of a group or organization.

International Covenant on Civil and Political Rights (ICCPR)

The agreement completed in 1966 and in force from 1976 that details the basic civil and political rights of individuals and nations.

International Covenant on Economic, Social, and Cultural Rights

The agreement completed in 1966 and in force from 1976 that specifies the basic economic, social, and cultural rights of individuals and nations.

International Bill of Rights

Refers collectively to the UDHR, the ICCPR, and the ICESCR. Together, these three agreements form the core of the international human rights regime.

Nonderogable rights

Rights that cannot be suspended for any reason, including at times of public emergencies.

Prisoners of conscience (POCs)

A label coined and used by the human rights organization Amnesty International to refer to individuals imprisoned solely because of the peaceful expression of their beliefs.

Individual petition

A right that permits individuals to petition appropriate international legal bodies directly if they believe a state has violated their rights.

International Criminal Court

A court of last resort for human rights cases that possesses jurisdiction only if the accused is a national of a state party, the crime took place on the territory of a state party, or the UNSC has referred the case to the prosecutor.


Costs or benefits for stakeholders other than the actor undertaking an action. When an externality exists, the decision maker does not bear all the costs or reap all the gains from his or her action.


Characterizing a public good: if the good is available to one actor to consume, then other actors cannot be prevented from consuming it as well.

Chlorofluorocarbons (CFCs)

Chemical compounds used in aerosols, insulating materials, refrigerator and airconditioner coolants, and other products. CFCs are widely banned today owing to their damaging effect on the ozone layer.

Ozone layer

Part of the lower stratosphere, approximately six to 30 miles above the earth, with relatively high concentrations of ozone (O3), which blocks harmful UV radiation.

Global climate change

Human - induced change in the environment, especially from the emissions of greenhouse gases, leading to higher temperatures around the globe.

Nonrival Good

Characterizing a public good: one actor's consumption of the good does not diminish the quantity available for others to consume as well.

Kyoto Protocol

An amendment to the United Nations Framework Convention on Climate Change, adopted in 1997 and entered into force in 2005, that establishes specific targets for reducing emissions of CO2 and five other greenhouse gases.

Common pool resources

it is difficult to exclude anyone from using the common pool, but one user's consumption reduces the amount available for others.


Consumption of a good at a rate that is collectively undesirable, even if it is efficient from the view of any single actor.

Vienna Convention

A framework convention adopted in 1985 to regulate activities, especially emissions of CFCs, that damage the ozone layer.

Montreal Protocol

An international treaty, signed in 1989, that is designed to protect the ozone layer by phasing out the production of a number of CFCs and other chemical compounds.

Framework Convention on Climate Change (FCCC)

An international agreement enacted in 1992, and entered into force in 1994, which provided an overall framework for intergovernmental efforts on climate change.

Uruguay Round

created the World Trade Organization


earning money abroad and then sending the money back home

Rome Statute

an international treaty that establishes the International Criminal Court

Fully Fixed Exchange Rate

ties government hands, changes become very politically difficult (signal to world problem), doesn't reflect supply and demand

Fully Floating Exchange Rate

let the market decide reflects moment of supply and demand, efficient but volatile


1. States have a responsibility to protect their population 2. Other States have the responsibility to help other States protect their populations 3. If a State is unable or unwilling to help its people, other States have the responsibility to protect this States' citizens

Principle of Complimentarity

ICC will act only when countries themselves are unable or unwilling to prosecute, "court of last resort"

Foreign Direct Investment

Investment made by a foreign company in the economy of another country.

Portfolio Investment

The limited, speculative purchase of stocks and bonds in a foreign company by individuals or equity funds.

Blue Helmets

1) Impartiality 2) Consent of both sides 3) No use of force, except of in self-defense or defense of mandate

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