What is Gresham's Law Any circulating currency consisting of both "good" and "bad" money (both forms required to be accepted at equal value under legal tender law) quickly becomes dominated by the "bad" money. This is because people spending money will hand over the "bad" coins rather than the "good" ones, keeping the "good" ones for themselves. Legal tender laws act as a form of price control. In such a case, the artificially overvalued money is preferred in exchange, because people prefer to save rather than exchange the artificially demoted one (which they actually value higher).

"Bad money drives out good" This law applies specifically when there are two forms of commodity money in circulation which are required by legal-tender laws to be accepted as having similar face values for economic transactions.

What are capital controls

Regulations limiting the ability of firms or households to convert domestic currency into foreign exchange is an example of…

What is the Reciprocal Trade Agreements Act (RTAA) of 1934

In response to the Smoot-Hawley tariff bill, this act authorized the president to negotiate tariff-reductions (by up to 50 percent) in exchange for compensating tariff reductions by partner trading countries.

What is unilateral trade retaliation

Under the GATT, when a country engaged in practices that the US Trade Representative deemed “unjustifiable, discriminatory or unfair” How did the U.S. respond?

What is the International Monetary Fund

This organization is criticized by Martin Feldstein for over-reaching in the Asian financial crisis, causing moral hazard, policing sovereign countries, and imposing too great of structural and institutional reforms on developing countries.

What is Hegemonic Stability Theory

Krasner's theory that argues the structure of international trade is determined by the interests and power of states acting to maximize national goals.

What is the United States

The country that currently has the largest Balance of Payments deficit

Pay the American shrimp organization/lobby directly so that they would call off the pressure of the US government for the review. The foreign importers ended up paying millions directly to American shrimpers.

In the Economist Article, "Shrimp Cocktail," what did foreign shrimp exporters do in response to American producers’ threat to push for government review of dumping?

What is the General Agreement on Trade and Services (GATS)

The agreement following from decisions made at the Uruguay round of trade negotiations that established rules for the liberalization of international trade in services (e.g. banking, insurance, transport, telecommunications, health and education provision).

What is an horizontally integrated MNE and a vertically integrated MNE, respectively.

These are two types of MNE’s identified by Richard Caves 1. An MNE that establishes plants in different countries to make the same or similar goods 2. An MNE that produces outputs in some of its plants that serve as inputs to its other activities

What is Heckscher-Ohlin

The trade theory that says a country will have a comparative advantage in, and thus will tend to export, those goods whose production requires the intensive use of the factor of production that is has in relative abundance.

What is Gresham's Law

"Bad Money Drives Out Good" The Law that states that if two coins are in circulation, the relative face values of which differ from their relative bullion content, the "good" coin will be extracted from circulation for melting down.

What is "beggar-thy-neighbor" policy

The enactment of an economic policy for the benefit of a country's economy which has an adverse affect on the economies of other countries.

What is the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

The WTO agreement that is criticized for slowing the spread of technology, hampering the ability of developing countries to compete in markets where the industrial world already has an advantage, and failing to stimulate innovation in the worlds poorer countries. It is unique in that it requires domestic regulation within the country’s borders, as opposed to international supervision. Furthermore, it is not necessarily welfare-enhancing for all parties, as is the trading of goods.

What are trade-creating (benign) PTAs trade-diverting (malignant) PTAs

Mansfield and Milner in “The New Wave of Regionalism” distinguish between two different types of preferential trade agreements. What are they?

What is factor mobility? Ricardo Viner does not assume factor mobility. Stolper-Samuelson does (and hence so does Rogowski).

Alt and Gillian in “The Political Economy of Trading States” review the determinants of trade-policy coalitions. They contrast Rogowski’s factor based approach(based on Stolper-Samuelson) with a sectoral approach drawn from the Ricardo-Viner model. What do they highlight as the main, important difference between Rogowski’s model and the Ricardo-Viner model?

What is -The dominance of gold in British monetary circulation throughout most of the 18th century was due to Gresham's law via the rapid growth of Brazilian mines. This kept the free market silver/gold exchange ratio in the free market below the official ratio and silver tended to move out of circulation. -The strength and dominance of the British economy. Britain was on the Gold Standard, encouraged other countries seeking trade with Britain to follow (network externalities). -Industrial Revolution/ Steam Press -The creation of token silver coins: money with more value than its official value.

Name one reason why Gold, not silver, become the common currency in the early 19th century according to Eichengreen?

What is a trade diversion

An economic term in which trade is pushed from a more efficient exporter towards a less efficient one by the formation of a regional or preferential trade agreement.

What is 1.Most favored nation (MFN)- trading partners give the same tariff reductions granted to their preferred trading partner to all other member nations. 2. Reciprocity- the reciprocal reduction in tariff rates in a trade agreement between nations to balance out the exchange of benefits. 3. Economic liberalism- agreement with the principle of economic openness or the encouragement of free flow of goods between two nations.

Name two of the three principles that came from previous US bilateral trade agreements, carried over into the GATT, and still exist today in the WTO treaty.

Who is Scheve and Slaughter

Name the authors who call for a "New Deal for Globalization" which would combine further trade and investment liberalization with elimination of the full payroll tax (Social Security and Medicare) for all workers earning below the national median.

What is a group of economists and policy experts with Keynesian ideas were able to identify a group of common Anglo-American interests.

Ikenberry in “Creating Yesterday’s New World Order” offers what explanation for the establishment of an open international economic system?

US economy ran too fast for a key currency country. System was unstable because of the inflexible mechanism for adjustment and exchange rate changes. Required capital controls, but, such controls were not viable in a world based on trade.

List two reasons why the Bretton Woods system failed.

Who is Kapstein in "Workers and the World Economy: Breaking the Postwar Bargain" Foreign Affairs

The author who argues that, 1. because the TAA (trade adjustment assistance program) fails in providing the necessary compensation to trade-displaced workers, a surge of protectionism has erupted amongst labor groups and unions, and 2. because the benefits of free trade are too numerous to give up, the government must create new, better functioning programs to take care of trade-displaced workers in addition to fixing programs like the TAA.

-US and EU exercise de facto veto on Appellate Body members, vetting candidates in advance to ensure that they are not too activist, biased or expansive lawmakers -rules can be rewritten in another round if states feel Appellate Body is overreaching -Members can and do express disapproval of Appellate Body decisions through diplomatic statements

Name one way states constrain the Appellate Body in its legislating under the WTO.

What is • Fiscal discipline, ie stop running large trade deficits • Control public expenditures • Tax Reform • Financial liberalization • Maintain competitive exchange rate • Trade liberalization • Allow FDI • Privatization • Deregulation • Assure property rights

Ten items of the Washington Consensus