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Stack #4726053
| Question | Answer |
|---|---|
| Terms of Trade: * | The rate at which one country trades its goods for another country's goods. he U.S. trades cars for computers from another country. |
| Tariff:* | A tax on goods brought into a country from another country. (all tariffs raise revenue) Example: The U.S. puts a tax on imported cars. |
| Quota: * | A limit on how much of a good can be imported into a country. Example: The U.S. allows only 10,000 imported cars per year. |
| Non-tariff barrier: * | A rule or restriction that makes it harder for foreign goods to enter a country. Example: Requiring imported products to pass special inspections. |
| Tariffs and quotas tend to result in cost or gains:* | cost |
| In comparing a tariff and an import quota, we find that: * | The tariff generates revenue for the U.S. Treasury, but the quota does not |
| Dumping:* | Selling goods in another country for less than you sell it at home, perhaps even lower than it cost to produce it. Example: A company sells steel cheaply in another country to gain more customers. |
| Gains from international trade: * | The benefits a country gets from buying and selling goods with other countries. |
| NAFTA: * | A trade agreement between the United States, Canada, and Mexico that reduced trade barriers between the three countries./ Created a free trade zone among United States, Canada, and Mexico |
| EU (European Union): * | A group of European countries that work together on trade, laws, and the economy. Has 27 nations |
| Eurozone:* | The group of European Union countries that use the euro (€) as their currency. |
| Comparative Advantage * | When a person or country can produce something at a lower opportunity cost than others.Comparative advantage = give up less to produce something. ex If the U.S. can produce cars with less sacrifice than Mexico, the U.S. has a comparative advantag in cars |
| How to determine which country should produce which product: | Find the opp cost of producing each product in each country./Compare the opp costs./The country with the lower oppy cost has the comparat advantage in that product./That country should specialize in producing that product and trade for the other product. |
| Protective tariff: | A tax on imports to protect businesses in the country. Example: The U.S. puts a tax on imported steel to help U.S. steel companies. |
| Revenue tariff: | A tax on imports that helps the government make money. Example: The government taxes imported coffee and collects the money. |
| Import quota: | A limit on how much of a product can be imported. Example: The U.S. only allows a certain amount of sugar to be imported. |
| Voluntary export restriction: | When a country agrees to limit how much of a product it exports. Example: Japan agrees to send fewer cars to the U.S. |
| Export subsidy: | Government money given to businesses to help them sell products to other countries. Example: The government gives farmers money to help them sell crops overseas. |
| GDP (Gross Domestic Product) = | the total market value of all final goods and services produced within a country during a specific period, usually one year. How much a country produces. |
| final goods | Goods bought by the final user and not used to make another product. Example: You buy a pizza to eat. |
| intermediate goods | Goods used to produce another good or service. Example: Flour used to make pizza. Intermediate goods are not counted separately in GDP to avoid double counting. |
| Nonmarket transaction: | An activity that does not involve buying or selling in a market. Example: Cleaning your own house. |
| included in GDP | GDP includes things that are newly produced and sold in a market. New cars New houses Food bought at a restaurant Haircuts Doctor visits New business equipment Government purchases Exports |
| not included in GDP | Intermediate goods Used/secondhand goods Nonmarket activities Stock and bond purchases Transfer payments Goods produced outside the country |
| Nominal GDP: | The value of goods and services measured using current prices (does not account for inflation). the number od dollars recived as wages, rent interest or profit |
| The GDP deflator | -measures how much prices have changed compared with the base year. |
| expedentures appraoch C | personal consumption |
| expedentures appraoch IG | gross private domestic investment |
| expedentures appraoch G | goverment purchases |
| expedentures appraoch Xn | net exports exports- imports |
| Disposable income- | the amount of personal income people have left after personal taxes. |
| Short coming on gdp- | Nonmarket activities Leisure and psychic income Improved product quality The underground economy GDP and the environment Composition and distribution of output Noneconomic sources of well-being |
| Depreciation: | The loss in value of capital as it gets older or wears out. Example: A machine gets old and is worth less. |
| net investment | amount of new capital added after accounting for depreciation. A business buys $100 worth of new equipment. The equipment loses $30 in value from depreciation. Net Investment = $100 − $30 = $70 Answer: $70 is the net investment. |
| Gross domestic investment- | Total spending on new capital and inventory in the country. |
| Gross private Domestic Investment | Spending by private businesses on new capital and inventory. |
| Consumption of fixed capital- | The loss in value of capital because it wears out or becomes outdated. examples:A machine gets old and wears out.,A truck becomes less valuable after being used for years |
| Productive capacity = | The maximum amount of goods and services an economy can produce. A factory can produce 1,000 cars per year → its productive capacity is 1,000 cars per year. |
| Growing productive capacity: | The economy can produce more than before. |
| Shrinking productive capacity: | The economy can produce less than before. |
| how do u measure productive capacity | Net Investment > 0 → productive capacity is growing Net Investment = 0 → productive capacity stays the same Net Investment < 0 → productive capacity is shrinking |
| exports | goods/services sold to other countries |
| imports | goods/services bought from other countries |
| Frictional Unemployment: | employed while looking for another job ( frictional is temporary and can be good for economy ) |
| Structural Unemployment: | Unemployment that happens when workers’ skills do not match the jobs available. (considered good) Example: A factory worker loses their job because machines replace their job, and they do not have the skills needed for the new technology. |
| Cyclical Unemployemt: | Unemployment caused by a recession or downturn in the economy. Example: A restaurant lays off workers because fewer people are spending money during a recession. |
| Unemployment rate: | The percentage of the labor force that is unemployed and actively looking for a job. Unemployment Rate = (Number of Unemployed ÷ Labor Force) × 100 |
| Hyperinflation | = prices rise extremely fast + money loses value. Example: If a loaf of bread costs $2 today but costs $10 next week and $50 a few weeks later, that is hyperinflation. |
| Inflation: | overall price level increases. It does not mean every single price has to increase. |
| Inflation Effect on purchasing power: | Inflation decreases purchasing power, meaning your money buys less than it did before. Example: If $10 used to buy 5 items but now only buys 3 items, your purchasing power has decreased. |
| Cost push inflation: | Prices rise because the cost of making products increases. Example: The price of oil increases, so it costs more to make and transport products. Businesses raise their prices. |
| Demand push inflation | :Prices rise because people want to buy more goods and services than businesses can produce. Example: Lots of people want to buy houses, but there aren't enough houses available, so house prices increase. |
| business cycle | is the ups and downs of the economy over time. |
| phases of buisness cycle expantion | The economy is growing. Jobs, income, and production increase. |
| phases of buisness cycle peak | The economy reaches its highest point before slowing down. |
| phases of buisness Recession: | The economy slows down. Production, income, and jobs decrease. |
| pashes of the buisness cycle Trough: | The economy reaches its lowest point before starting to recover. |
| What causes fluctuations? | Changes in spending → changes in the economy. Main causes: Consumer spending Business investment Government spending Interest rates |
| Discouraged Workers: | People who want a job but have stopped looking because they believe they can't find one. |
| Part-Time Workers: | People who work part-time but want full-time work. |
| Effect on Unemployment Rate: | Both can make the unemployment rate look lower than the actual amount of unemployment. |
| Full-Employment Rate of Unemployment (Natural Rate): | The unemployment rate when the economy is at full employment. It includes frictional + structural unemployment, but not cyclical unemployment. |
| Potential GDP: | The amount of GDP the economy could produce when all resources are fully employed. |
| Actual GDP: | The amount of GDP the economy actually produces. |
| GDP Gap: | The difference between potential GDP and actual GDP. |
| What 2 things are considered natural rate - | Frictional and structural unemployment |
| unemployed | People who do not have a job but are actively looking for one. |
Created by:
sophiasouza