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Absolute advantage: The advantage achieved when a nation can produce a good or service at a lower cost than another nation
Balance of payments: The difference between all monies coming into and going out of a country
Balance of trade: The difference between the value of a nation’s exports and its imports
Comparative advantage: The advantage achieved by a nation from specializing in and producing goods and services at which it is most efficient, relative to another country.
Currency: The money that a country uses to buy and sell goods and services
Domestic trade: The buying and selling of goods and services within a country
European Union (EU): An association of European countries with uniform trade rules that eliminated all barriers and restrictions on the movement of goods and services among member nations
Exporting: The process of selling goods and services to individuals, businesses, or governments in other countries
Exports: Goods and services sold by businesses and industries in one country to individuals, manufacturers, or governments in other countries
Foreign aid: The money that developed countries give to less developed countries to help with their economic development
Global trade: The buying and selling of goods and services among nations
Globalization: The rapid and unimpeded flow of capital, labor, and ideas across national borders
Gross domestic product: The final market value of the total output of all goods and services produced within a country’s geographic boundaries during a year’s time; expresses the dollar value of what is produced, not the volume of production
Importing: The process of buying goods and services from other nations
Imports: Goods and services bought from other nations
Inflation: A rapid rise in prices, usually occurring when demand exceeds supply
License: A permit to import or export goods and services
North American Free Trade Agreement (NAFTA): An agreement among the United States, Canada, and Mexico eliminating all of their trade barriers
Product standards: Criteria for determining a product’s ability to meet specified guidelines or requirements
Protectionism: A government’s policy to protect domestic industries and businesses against foreign competition
Quota: A trade restriction that limits the quantity of goods that can move into or out of a country
Subsidy: A payment provided by a government to a domestic producer; the payment is given to support the production of a particular good or service
Tariff: A tax levied by a government on imports
Trade agreements: Agreements between nations that provide for favorable trade relations
Trade centers: Facilities located in most major cities throughout the world that assist exporters through the export process and share information about tariffs, product standards, and other regulations with importers
Trade deficit: An unfavorable balance of trade in which a nation’s imports are greater than its exports
Trade mission: A trip involving business executives and/or government officials who travel to a foreign country to promote trade
Trade surplus: A favorable balance of trade in which a nation’s exports are greater than its imports
Trade talks: Meetings among nations to discuss improving economic and trade relations
World Trade Organization (WTO): A global organization that essentially sets the rules of trade among nations; administers trade agreements and handles trade disputes