Comparative Advantage and TNCs Quiz

The movement of jobs from developed countries to developing countries. This is often driven by lower labor costs and relaxed regulations in developing nations.

The difference in wages between those with high skills and those with low skills. Globalization can worsen this gap as demand for highly skilled workers increases while demand for low-skilled workers decreases.

Companies operating in multiple countries, often with headquarters in developed nations and production facilities in developing nations.

The ability to produce goods or services at a lower cost than other countries. This can lead to a country specializing in certain products and exporting them to other countries.

The idea that one country's economic activity can have a ripple effect on other countries, leading to wider economic growth. This is often seen in the context of TNC investments in developing nations.

A workplace with poor conditions and low wages, often found in developing nations. These workplaces may offer workers more money than other options but still fail to meet basic labor standards.

Governments can lose revenue through tax avoidance by TNCs. This happens when TNCs use legal loopholes to avoid paying taxes in countries where they operate.

Increased global trade and production can lead to greater demand for raw materials, which can have negative impacts on the environment, such as deforestation and pollution.

A country has this when it can produce a good more cheaply than another country.

The cost of producing one good in terms of another good. For example, if a country can produce 10 cars or 5 umbrellas with the same resources, the opportunity cost of 1 car is 0.5 umbrellas.

The potential advantages that countries can gain from trade, such as lower prices, greater variety of goods, and increased efficiency.

The risks associated with trade, such as job losses, environmental damage, and the potential for exploitation.

A situation where a country's industries decline due to competition from other countries, leading to unemployment and economic slowdown.

A scenario where a country's comparative advantage changes, making another country more competitive.

Lowering costs per unit produced as production increases.

The resources available to a country for production, like labor, land, and capital.

A situation where a country relies heavily on specific exports or imports, making it vulnerable to price fluctuations or disruptions in trade.

The impact of trade on the environment, including increased transport and resource demand.

Loss of control over domestic policies due to international agreements and trade blocs.

The influence of foreign products and ideas on a country's culture through trade.

A situation where a country exports more goods and services than it imports, resulting in a positive balance in its international trade.

An increase in the value of a currency compared to other currencies.

A country's ability to produce and sell goods and services in international markets, often at a lower cost compared to competitors.

A situation where a country relies heavily on other countries for its economic well-being, making it vulnerable to global economic downturns.

Increase in a country's production of goods and services, usually measured by the Gross Domestic Product (GDP).

A new industry within a country that is just starting up and needs protection to grow.

A situation where a country or company sells excess goods to other countries at extremely low prices, potentially harming domestic producers in those countries.

When a government intervenes to protect domestic producers from unfair competition, such as lower labor costs or subsidies, in other countries.

Government measures to restrict free trade, such as tariffs or quotas, to protect domestic industries and jobs.

The ratio of a country's export prices to its import prices. A favorable terms of trade means a country can buy more imports with a given amount of exports.

The argument that infant industries, needing time to build up and compete, should be protected from international competition.

The argument that a country should restrict imports to protect domestic jobs, even if it means higher prices for consumers.

Using international trade to improve a country's terms of trade by manipulating supply and demand.

A government intentionally weakens its currency to make exports cheaper and imports more expensive.

The Marshall-Lerner Condition states that the sum of price elasticities of imports and exports must be greater than one for a currency devaluation to positively impact the trade balance.

The J-curve shows the initial worsening of a country's current account balance after devaluation before it improves.

A currency devaluation can increase exports and decrease imports, boosting aggregate demand (AD) and leading to economic growth and more job creation.

Falling exchange rates increase inflation due to expensive imports and an increased AD impact from net exports.

A weaker currency makes it cheaper for foreign companies to invest in the country, potentially increasing foreign direct investment (FDI).

Other countries may retaliate by devaluing their own currencies if one country successfully devalues to gain a trade advantage.

A country's current account balance will likely improve following a successful devaluation, assuming the Marshall-Lerner condition holds true.