Introduction to International Economics

Direction: Write your answer in the space provided.

1. Trade balance
is the difference between the monetary value of a nation's exports and imports over a certain
time period.

2. Tariff
a tax or duty to be paid on a particular class of imports or exports.

3. Exchange Rate
 is the value of a country's currency vs. that of another country or economic zone.

4. Import quota
is a type of trade restriction that sets a physical limit on the quantity of a good that can
be imported into a country in a given period of time.

5. Free trade area

is a group of countries that have few or no barriers to trade in the form of tariffs or quotas
between each other. 

6. AEC
is the realisation of the region's end goal of economic integration. It envisions ASEAN as a
single market and production base, a highly competitive region, with
equitable economic development, and fully integrated into the global economy.

7. Trade surplus
the amount by which the value of a country's exports exceeds the cost of its imports.

8. Real exchange rate

compares the relative price of two countries' consumption baskets. 

9. Export
a commodity, article, or service sold abroad.

10. Custom unions-

is generally defined as a type of trade bloc which is composed of a free trade area with a
common external tariff.

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Part 2: Essay

Direction: Answer the following questions briefly but thoroughly. Write your answer on
the space provided.

1. Differentiate comparative advantage from absolute advantage. Discuss.

Absolute advantage refers to the ability of a country to produce a good more efficiently

than other countries while comparative advantage, which refers to the ability of a country
to produce specific goods at a lower opportunity cost. It just like the absolute advantage is
a comparison among the other countries in terms of producing goods efficiently while
comparative advantage is about the capability of a country to produce a low cost products

2. In your own understanding, what are the REAL gains from TRADE?

For me it is the benefit of having a trade from other economic agents and it will help the
Economy to increase.