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summary international economics 8th edition 2022 james gerber 978129433998 test bank questions 1 / 4
summary international economics 8th edition 2022 james gerber 978129433998 test bank questions 2 / 4
summary international economics 8th edition 2022 james gerber 978129433998 test bank questions Chapter 1 is all just prefacing introductory stuff, nothing you can expect on the exam Chapter 2 International Institutions and Issues since World War II International Institutions and Issues since World War II
International institutions: Rules and organizations that govern and constrain
behavior
•Formal institutions: Written sets of rules that explicitly state what is
and is not allowed
•Informal institutions: Customs or traditions that define appropriate
behavior, but without legal enforcement The IMF, the World Bank, and the WTO The three global organizations that play a major role in international economic
relations are:
The International Monetary Fund (IMF) •Founded by 29 countries (1945) at the Bretton Woods conference in July 1944 •The 188 member (2012) IMF is the central monetary institution in today’s international economy •Funding for the IMF comes from its membership fee, or quota (the price of membership) but depends on size of the economy •Importance of its currency in world trade The most visible role for the IMF is to intercede, by invitation, whenever a nation experiences a crisis in its international payments. For example, if a country imports more than it exports, then it may run out of foreign exchange reserves.Foreign exchange reserves are dollars, yen, pounds, euros, or another currency (or gold) that is accepted internationally. In the event of a financial crisis, •Members borrow against IMF quotas
•IMF conditionality: Requirement for the borrowing member to carry
out economic reforms in exchange for a loan IMF has its own currency, called an SDR, or special drawing right. SDRs are based on a country’s quota and are a part of its international reserves.The World Bank Has same membership and similar structure to IMF. Member’s voting rights are proportional to number of shares owned
Original purpose:
•To provide financing mechanisms to rebuild Europe after World
War II Main function today:
•Assisting development in non-industrial economies •Began with 23 nations in 1946 when the International Trade Organization (ITO) was established •The General Agreement on Trade and Tariffs (GATT) followed in 1950 3 / 4
summary international economics 8th edition 2022 james gerber 978129433998 test bank questions
The GATT functioned through trade rounds: Times when countries
periodically negotiate a set of incremental tariff reductions. During the Kennedy Round in the mid-1960’s, and the Tokyo Round in the 1970’s, other
issues included:
•Problems with dumping •Subsidies to industry •Nontariff barriers to trade The General Agreement on Trade and Tariffs (GATT) followed the following
principles:
•National treatment: Imports must be given similar treatment on
the domestic market as domestically produced goods
•Nondiscrimination: Enshrined in the concept of most favored nation
(MFN); a prohibition against discrimination –The World Trade Organization (WTO) Regional Trade Agreements •Regional trade agreements (RTAs) between two (bilateral) or •Several countries (plurilateral) are another important institution in the world economy, •Called multilateral agreement because it includes, potentially, all the countries of the world.Regional Trade Agreements and the WTO •Since 1948, over 500 agreements have been listed with the WTO; with majority of the notifications since 1990 •338 of these agreements are still active (2012) •The WTO and GATT allow RTAs, assuming they create more new trade than they destroy -trade creation > trade diversion For and Against RTAs
The central economic question:
Are RTAs supportive of gradual, long run increases in world trade (building blocks), or •Do they tend to become obstacles to further relaxation of trade barriers (stumbling blocks)?
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