Term
| production at a point lying inside the production possibilities curve is |
|
Definition
| possible but not effecient |
|
|
Term
| Production at a point lying outside of the production possibility curve is |
|
Definition
|
|
Term
| production at a point lying on the production possibilities curve is |
|
Definition
| both possible and efficient |
|
|
Term
| Where are on production possibility curve is best for the economy |
|
Definition
| does not show what is better or worse, only what shows what we can not what we should produce |
|
|
Term
| greater production of capital goods leads to |
|
Definition
| greater shift outward in PPC for future years |
|
|
Term
| limited production (lower on vertical axis) of capital goods will lead to |
|
Definition
| small shirt outward in PPC for future years |
|
|
Term
| an increase in prices across nation will lead to an increase in that nations PPC |
|
Definition
| False- higher prices do not lead to increase in productive capacity. |
|
|
Term
| Factors that increase PPC |
|
Definition
| larger labor force, improved technology, greater access to natural resources, increase in number of capital goods, and increased productivity of resources |
|
|
Term
| if one individual has comparative advantage in one of two tasks, the other individual must have comparative advantage in the other |
|
Definition
| true- never possible for one party to have comparative advantage in all areas |
|
|
Term
| If one individual has the absolute advantage in one of two tasks then the other individual must have the absolute advantage in the other task. |
|
Definition
| false- no rule or relationship that applies to absolute advantage |
|
|
Term
| when determining comparative advantage we must |
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
| who gives up less or has the lower opportunity cost |
|
|
Term
| Production possibility curve PPC |
|
Definition
| represents the amount of two goods that can be produced |
|
|
Term
|
Definition
| utilization of a fixed amount of resources, full efficient use of resources, and specific stock of technical knowledge |
|
|
Term
|
Definition
|
|
Term
| supply curve shifts right |
|
Definition
|
|
Term
| movement down the supply curve |
|
Definition
| decrease in quantity supplied |
|
|
Term
|
Definition
| only effects quantity demanded or supplied, not actual curve |
|
|
Term
| impact on equilibrium price and quantity if supply decrease |
|
Definition
| price will increase and quantity decrease |
|
|
Term
| impact on equilibrium price and quantity is demand decreases |
|
Definition
| both price and quantity will decrease |
|
|
Term
| impact on the equilibrium price and the equilibrium quantity if supply increases |
|
Definition
| price will decrease and quantity will increase |
|
|
Term
|
Definition
| equilibrium price increased and quantity increased |
|
|
Term
|
Definition
| equilibrium price decreased and quantity decreased |
|
|
Term
|
Definition
| quantities that consumers are willing to purchase at various price levels |
|
|
Term
|
Definition
| inverse relationship between price and quantity demanded. price increase-quantity demanded decrease and vice versa |
|
|
Term
|
Definition
| quantities that producers wish to sell at various price levels |
|
|
Term
|
Definition
| direct relationship between price and quantities supplied. if price increases- producers supply increases and vice versa |
|
|
Term
|
Definition
| found at the intersection of supply and demand |
|
|
Term
|
Definition
| known as market clearing price. number of units buyers wish to purchase equals number of units sellers wish to sell |
|
|
Term
| factors that change demand |
|
Definition
-change in taste or preference
-change in number of consumers
-change in expected future price
-change in price of related goods (substitutes and complements) |
|
|
Term
| factors that could change supply |
|
Definition
-change in resource cost
-change in technology
-change in expected future price
-change in number of producers |
|
|
Term
| to get market demand curve from individual demand curve |
|
Definition
| ass up quantities demanded at each price and plot points |
|
|
Term
| common property or some form of group ownership may lead to |
|
Definition
-greatly reduced incentive to maintain property
-greatly reduced incentive to conserve property |
|
|
Term
|
Definition
indicates common property will be overused
Ex- over hunting of American buffalo in 1800's |
|
|
Term
|
Definition
used by owners efficiently
ex- cell phones |
|
|
Term
|
Definition
-open pasture
-fishing areas in ocean
-pool in apartment complex
-highway |
|
|
Term
| economic theory for public goods |
|
Definition
| market will not produce good efficiently and government production would be necessary. |
|
|
Term
|
Definition
| people who benefit from good without paying for it |
|
|
Term
|
Definition
-designed to decrease prices.
-protects producers by keeping prices from declining too much
-creates surplus |
|
|
Term
|
Definition
-designed to keep prices from moving higher
-upper limit on prices designed to assist consumers
-helps consumers
-creates shortage |
|
|
Term
|
Definition
-owned by group rather than individual
-no incentive to maintain or conserve |
|
|
Term
|
Definition
-inability for producers to exclude users for non payment
-joint consumption |
|
|
Term
|
Definition
-counts number of goods and services produced within our economy
-adjusted for change in prices
-measures in terms of number of goods and services produced in economy
-effectively tells us how much output our economy has generated |
|
|
Term
|
Definition
-counts dollars used to buy those goods and services
-not adjusted for change in price
-measured in terms of number of dollars moving through economy |
|
|
Term
| nations economy preference for real and nominal GDP |
|
Definition
real-increase
nominal-not concerned |
|
|
Term
| if nominal GDP increases more than real GDP |
|
Definition
| output increase and inflation occured |
|
|
Term
|
Definition
-Gross National Product
-market value of all final goods and services produces in country by that countries citizens
-relates to who produced good
-old method |
|
|
Term
|
Definition
-Gross Domestic Product
-relates to where good was produced
-more commonly used over GNP |
|
|
Term
| if nominal and real GDP increase by same percentage |
|
Definition
| output increased and price remained stable |
|
|
Term
| if nominal GDP increases less than real GDP |
|
Definition
| output increased but deflation occurred |
|
|
Term
|
Definition
-constructed using market basket consisting of all goods produced inside out borders, making it a larger market basket than that used for CPI
-used to convert nominal GDP into real GDP |
|
|
Term
| income method of calculating GDP |
|
Definition
| compensation + interests + profits + rental income + proprietor's income |
|
|
Term
| CPI (Consumer Price Index) |
|
Definition
-constructed using market basket of goods and services that the average household would buy
-used to convert nominal income at the household or personal level into real income |
|
|
Term
| formula for GDP using expenditure method |
|
Definition
Y= C+I+G+X
or
Y=C+I+G+exports-imports |
|
|
Term
|
Definition
| essentially raw materials that will be used by a business in the production of another good |
|
|
Term
|
Definition
good sold to produce final product that will not be resold
ex-grandmother buying yarn to make a hat for her granddaughter |
|
|
Term
| two major markets in economy |
|
Definition
market for goods and services
resource market |
|
|
Term
| market for goods and services |
|
Definition
all products and services produced in the US
-income flows through this from households to businesses |
|
|
Term
|
Definition
land, labor, and capital used to produce goods are services
-funds flow back to households through this |
|
|
Term
|
Definition
-only items that are final goods or services
-not include intermediate goods
-doesn't include items produced in previous years, such as used cars
-doesn't include financial transactions, such as gifts, stocks, or welfare payment |
|
|
Term
|
Definition
| comparison of prices for a wide range of goods for different time periods |
|
|
Term
|
Definition
-divide the GDP deflators
-multiply that number by the nominal GDP in the later year
-subtract that number with nominal GDP in earlier year
-divide that number by nominal GDP in earlier year
-Multiply answer by 100 to get percentage |
|
|
Term
|
Definition
-divide CPIs
-multiply that number by the nominal income in the later year
-subtract that number from nominal income in earlier year
-divide answer by nominal income in earlier year
-multiply by 100 to get percentage |
|
|
Term
|
Definition
| -tells us how much a households purchasing power has changed |
|
|
Term
| Real GDP does not account for |
|
Definition
-household production
-illegal activities
-changes in quality
-social costs(externalities)
-the value of leisure |
|
|
Term
|
Definition
-impacts workers across all industries
-once eliminated, economy has reached full employment |
|
|
Term
| impact of unemployed persons increasing |
|
Definition
| unemployment rate would increase and labor force participation rate would increase |
|
|
Term
| labor force participation rate |
|
Definition
|
|
Term
|
Definition
=U/(E+U)
E+U= labor force
U=unemployed
E=employed |
|
|
Term
| impact of size of population increasing |
|
Definition
unemployment rate-unchanged
labor force participation rate- decrease |
|
|
Term
|
Definition
-occurs as workers gather information about jobs and employers collect information about workers
-takes place as workers from to different jobs and employers look for new workers |
|
|
Term
| number of employed persons increased impact |
|
Definition
unemployment rate- decrease
labor force participation rate- increase |
|
|
Term
| types of unemployment not possible to eliminate |
|
Definition
| frictional, structural, and seasonal |
|
|
Term
| unemployment lease likely to be significant issue |
|
Definition
| on business cycle- at peak, indicates substantial growth in real GDP. when our economy is producing large amounts of goods and services unemployment is unlikely to occur |
|
|
Term
| unemployment significant issue |
|
Definition
| on business cycle- at lowest point where limited growth or even a decrease in real GDP occurs. economy is producing reduced amount of output |
|
|
Term
| expansion on business cycle |
|
Definition
|
|
Term
|
Definition
output grows slowly or even declines
-unemployment likely to be high |
|
|
Term
|
Definition
-done any work at all for pay or profit
-worked for a family business without pay for 15 or more hours
-not about to work for a personal or medical reason |
|
|
Term
|
Definition
-not employed for current week and attempted to find work in last four weeks
-waiting to start new job
- temporarily laid off and waiting to be recalled |
|
|
Term
|
Definition
-discouraged worker
-full time/part time
-worker registration requirments |
|
|
Term
|
Definition
not actively looked for work in past four weeks. considered neither employed nor unemployed.
not being utilized as part of labor force |
|
|
Term
|
Definition
| unemployment rate does not distinguish between these two |
|
|
Term
| worker registration requirements |
|
Definition
gives appearance they are looking for work but really aren't only to receive government benefits.
bias the unemployment rate |
|
|
Term
|
Definition
-changes in economy reduce need for workers in a specific industry or job
-mismatch of jobs and workers skills. implies need for training in other areas |
|
|
Term
|
Definition
| different. stores hiring more workers during holiday months |
|
|
Term
|
Definition
-defined as a situation in which cyclical unemployment is eliminated.
-does not imply unemployment rate of zero
-usually unemployment rate is 4-5% |
|
|
Term
|
Definition
| unemployment rate + rate of inflation |
|
|
Term
|
Definition
| subtract differences of CPI and multiply it by original CPI |
|
|
Term
| equal according to Fisher Effect |
|
Definition
| change in rate of inflation and change in nominal interest rate |
|
|
Term
|
Definition
| more likely to be a concern when economy is rapidly growing |
|
|
Term
|
Definition
| nominal rate of interest - inflationary premium(expected rate of inflation) |
|
|
Term
|
Definition
-not causes by higher prices, but DEFINED by higher prices
- |
|
|
Term
|
Definition
-market basket consisting of items purchases by producers
-leading indicator and will give earliest signal of change in price
- |
|
|
Term
|
Definition
| important factor- level of inflation |
|
|
Term
|
Definition
-not adjusted for inflation
-measured in terms of number of dollars received or paid |
|
|
Term
|
Definition
-adjusted for inflation
-measured in terms of purchasing power not dollars |
|
|
Term
| percent of income paid in taxes |
|
Definition
|
|
Term
|
Definition
| those who receive benefits pay for these benefits through taxation |
|
|
Term
|
Definition
-those more capable of paying taxes do go
-horizontal equity
-vertical equity |
|
|
Term
|
Definition
| those who earn the same income pay the same amount in taxes |
|
|
Term
|
Definition
| those who earn more income pay a greater amount in taxes |
|
|
Term
|
Definition
-those who earn more pay a greater percentage of their income in taxes
-EX. federal income tax |
|
|
Term
|
Definition
-everyone pays the same percentage of their income in taxes
-EX. medicare tax
-sales tax not proportional because we pay same percentage of price, not our incomes |
|
|
Term
|
Definition
-those who earn more pay a smaller percentage of their income in taxes
-contradicts ability to pay principle
-EX. a necessity |
|
|
Term
|
Definition
=tax rate*tax base
tax base represents amount of economic activity or income |
|
|
Term
| excessive increase in tax rate |
|
Definition
| would cause people to reduce or hide incomes from taxation, which would imply decrease in tax base |
|
|
Term
|
Definition
described relationship between the average tax rate and tax revenues
-relationship is based on changes in tax rate and also resulting changes in tax base |
|
|
Term
|
Definition
| increase in tax rate will lead to decrease in total revenue |
|
|
Term
| bottom half of laffer curve |
|
Definition
| increase in tax rate will lead to increase in total revenues |
|
|
Term
| points A and B on laffer curve |
|
Definition
| different tax rates but produce same amount of tax revenue. |
|
|
Term
|
Definition
-represents that amount of goods and services that consumers want to buy over a range of different prize levels
-inverse relationship between price and quantity
-graph shows consumers will buy more US goods when prices are low and fewer when pricers are high |
|
|
Term
| short run aggregate supply |
|
Definition
-refers to the amounts that producers want to sell at various price levels immediately after a change in prices
-positive slope, moves up as we move from left to right |
|
|
Term
| short run aggregate demand |
|
Definition
-downward slope
-indicates consumer will want to buy more goods and services as price decreases |
|
|
Term
| long run aggregate supply |
|
Definition
-amount of all final goods and services that producers want to sell at various price levels after they have had enough time to adjust to a change in prices
-resource prices change
-vertical slope |
|
|
Term
| increase in consumer confidence |
|
Definition
-leads to increase in aggregate demand AD;shift to the right
-creates movement along SRAS curve because of increase in quantity |
|
|
Term
| increase in exchange rate value of dollar will lead to |
|
Definition
-decrease in AD
-decrease in quantity of SRAS (movement along curve) |
|
|
Term
| increase in expected future inflation leads to |
|
Definition
-increase in AD; shift to the right
-decease in SRAS; shift to the left |
|
|
Term
| increase in price of an important resource like oil would lead to |
|
Definition
-decrease in SRAS; shift to the left
-decrease in quantity of AD(movement along curve) |
|
|
Term
| stronger environmental regulations on industrial pollution leads to |
|
Definition
-decrease in SRAS; shift to left
-decrease in LRAS; shift to left
-decrease in quantity AD; movement along curve |
|
|
Term
| decrease in national income caused by economic downturn leads to |
|
Definition
-decrease in AD; shift left
-decrease in quantity SRAS; movement along curve |
|
|
Term
| An improvement in the productivity of all workers caused by improved computer technology leads to |
|
Definition
-increase in SRAS; shift right
-increase in LRAS; shift right
-increase in quantity AD; movement along curve |
|
|
Term
| increase in interest rates leads to |
|
Definition
-decrease in AD; shifts left
-decrease in SRAS; shift left |
|
|
Term
| AD increases results with |
|
Definition
-increase in output
-increase in price level |
|
|
Term
| SRAS increase results with |
|
Definition
-increase in output
-decrease in price level |
|
|
Term
| LRAS decreases results with |
|
Definition
-decrease in output
-increase in price level |
|
|
Term
| decrease in income leads to |
|
Definition
decrease in both prices and output
-decrease in AD; shift left |
|
|
Term
| decrease in interest rates leads to |
|
Definition
increase in both price and output
-increase in AD; shift right |
|
|
Term
|
Definition
-where AD and SRAS curves intersect along LRAS curve
-stable situation
-trend line in business cycle
-economy neither too slow nor too fast |
|
|
Term
|
Definition
| -caused by an increase in AD |
|
|
Term
|
Definition
| -caused by an decrease in SRAS |
|
|
Term
| aggregate supply and demand graph |
|
Definition
-results used to assess the overall health of the economy
-horizontal axis: track real GDP (Y)
-vertical axis: track price level across economy (GDP deflator) |
|
|
Term
| reasons for downward slop of AD curve |
|
Definition
-international substitution effect
-real balance effect
-interest rates effect |
|
|
Term
| international substitution effect |
|
Definition
| as prices increase in the US, consumers purchase more goods from other countries, which decreases the amount purchases in the US |
|
|
Term
|
Definition
| as price increase, purchasing power of cash and deposits held by consumers decreases causing them to purchase fewer goods and services |
|
|
Term
|
Definition
higher prices causes consumers to hold more money
-reduces the amount held in banks
-decreases amount of funds available for loans
-increases interest rates
-decreases quantity of aggregate demand |
|
|
Term
|
Definition
-increase in real income/wealth
-increase in consumer confidence/optimism
-decrease in interest rates
-increase in expected rate of inflation
-decrease in exchange rate value of dollar |
|
|
Term
|
Definition
-decrease in resource costs
-decrease in expected rate of inflation
-positive supply shocks |
|
|
Term
|
Definition
(SRAS shifts in same direction along with LRAS)
-increase in amount of resources
-increase in productivity of resources
government factors
-decrease in corporate tax rates
-decrease in environmental regulations |
|
|
Term
|
Definition
-exists when SRAS and AS intersect at point not on LRAS curve
-base of LRAS=full employment level of output
-unstable situation
-peak or valley of business cycle
-economy either too slow or too fast |
|
|
Term
|
Definition
-changes in taxation
-changes in government spending |
|
|
Term
| fiscal policy action when economy growing too slowly |
|
Definition
| decrease taxes-leaves more money to consumers |
|
|
Term
| fiscal policy action when inflation is significant concern |
|
Definition
| increase taxes and decrease government spending |
|
|
Term
| fiscal policy actions when unemployment most significant concern |
|
Definition
| decrease taxes and increase government spending |
|
|
Term
| expansionary fiscal policy |
|
Definition
| -causes increase output, increase price levels, and increase the deficit |
|
|
Term
| restrictive (contractionary) fiscal policy |
|
Definition
| -causes decrease output, decrease price level, and decrease the deficit |
|
|
Term
|
Definition
| -indicates that government spending will have large impact on economy. Keynesian argument |
|
|
Term
|
Definition
| -classical argument that indicates that expansionary fiscal policy will not work well |
|
|
Term
|
Definition
| -time needed for policy makers to change existing economic policies |
|
|
Term
|
Definition
| -time needed for policy makers to realize that there is a problem in the economy |
|
|
Term
|
Definition
-believe that resources are completely flexible
-economy begins to move too fast; resource prices will increase
-economy begins to move too slow; resource prices will decrease
-feel the economy will return to full employment quickly
-supply creates its own demand
-government should not attempt to influence economy
-Laissez-fairs economics
- in long run, economy will return to long run equilibrium with full employment |
|
|
Term
|
Definition
-believe that resource prices are not flexible;particularly downward
-economy begins moving too fast;resource prices may adjust
-economy begins moving too slow; resource prices will not adjust
-feel economy will not return to long run equilibrium or full employment quickly or not at all
-aggregate demand is volatile (animal spirits)
-government must attempt to fix economy
-discretionary policy
-all dead in long run |
|
|
Term
|
Definition
-store of value
-unit of measurement
-medium of exchange |
|
|
Term
|
Definition
-currency
-checking accounts
-balances
-other checkable deposits
-travelers checks |
|
|
Term
|
Definition
-currency
-checking accounts
-other checkable deposits
-travelers checks
-savings accounts
-small time deposits
-retail MMMFs |
|
|
Term
| fractional reserve banking system |
|
Definition
-requires banks to only hold small percentage of deposits as reserves. usually 8%
-reserves held as either vault cash in bank or deposits at FED |
|
|
Term
|
Definition
| =amount of new deposit*reserve ratio |
|
|
Term
|
Definition
| =amount of new deposits(actual reserves)-required reserves |
|
|
Term
| deposit expansion multiplier |
|
Definition
=1/reserve ratio
-a potential or maximum multiplier while
the expenditure multiplier was an actual multiplier |
|
|
Term
|
Definition
-independent of the federal government
-responsible for monetary policy not fiscal policy
-buys and sells government securities in open market
-not original seller of government securities |
|
|
Term
| members of FED's board of governors |
|
Definition
| -appointed by US president and approved by senate for term of 14 years |
|
|
Term
| Federal open market committee |
|
Definition
| -responsible for the purchase and sale of government securities |
|
|
Term
|
Definition
-responsible for establishing the regulations for depository institutions
-14 year term
-appointed by president
-approved by senate
-7 members |
|
|
Term
| federal reserve district banks |
|
Definition
-responsible for check clearing activities
-responsible for issuing federal reserve notes
-responsible for accepting deposits
-"bankers bank"
-12 districts across US |
|
|
Term
|
Definition
-changing the reserve requirements
-changing the discount rate
-buying or selling government securities |
|
|
Term
|
Definition
| interest rate that the FED charges banks to borrow money |
|
|
Term
|
Definition
| interest rate that banks charge other banks to borrow money |
|
|
Term
|
Definition
|
|
Term
|
Definition
| -maturities of 3 months, 6 months, and 1 year |
|
|
Term
|
Definition
| -maturities between 2-5 years |
|
|
Term
|
Definition
| (value of maturity-purchase price)/ purchase price |
|
|
Term
| items commonly used as form of money |
|
Definition
|
|
Term
|
Definition
-lists basked on order of liquidity
-M1 and M2 |
|
|
Term
|
Definition
| banks vault cash + deposits with the Fed - outstanding loans |
|
|
Term
|
Definition
| initial deposit * deposit expansion multiplier |
|
|
Term
| Federal open market committee |
|
Definition
-12 members
-7 members of board of governors
-president of district bank of NY
-other district presidents rotate into 4 remaining spots
-responsible for buying or selling government securities |
|
|
Term
|
Definition
-percentage of deposits each bank must maintain
-increase=decrease in money supply
-decrease=increase in money supply |
|
|
Term
|
Definition
-interest rate that banks must pay if they have to borrow money from the Fed, which is lender of last resort
-increase=decrease in money supply
-decrease=increase in money supply |
|
|
Term
|
Definition
-the Fed buying or selling government securities
-sale=decrease in money supply
-purchase=increase in money supply |
|
|
Term
|
Definition
-separate from the Fed
-issues government securities to finance budget deficit |
|
|
Term
| inflation most significant problem, monetary policy response |
|
Definition
| sell government securities |
|
|
Term
| unemployment most significant problem, monetary policy response |
|
Definition
|
|
Term
| Fed wants to increase growth rate of economy |
|
Definition
-buy government securities
-decrease reserve requirements
-decrease discount rate |
|
|
Term
| Fed wants to decrease economic growth rate |
|
Definition
| increase reserve requirements |
|
|
Term
| Fed wants to increase economic growth rate |
|
Definition
-buy government securities
-decrease reserve requirements |
|
|
Term
| equation of exchange from quantity theory of money |
|
Definition
PY=MV
p-price level-GDP deflator
y- output- real GDP
M- money supply (M1 or M2)
V- velocity of money |
|
|
Term
|
Definition
-school of thought similar to classical economist. seen as descendent from classical economist.
-variable Y and V assumed to be effectively constant
-believe that contractionary monetary policy will be effective in achieving the desired results but expansionary will not |
|
|
Term
|
Definition
-average number of times a dollar is used to purchase a final good or service during given year
=(P*Y)/M
(deflator ratio * real GDP)/ M1
P*Y= nominal GDP |
|
|
Term
| countercyclical monetary policy |
|
Definition
-needed if economy does not self-correct
-helps find a way to lower interest rates if economy is moving too slowly or raise interest rates if economy is moving too fast |
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Term
| economy moving too slowly |
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Definition
fed would
-decrease reserve ratio
-decrease discount rate
-buy government securities |
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Term
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Definition
Fed would
-increase reserve requirements
-increase discount rate
-sell government securities |
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Term
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Definition
| -demand to hold currency in liquid form (demand to hold cash) |
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Term
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Definition
-transaction demand
-precautionary demand
-speculative demand |
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Term
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Definition
| money held for planned expenditures |
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Term
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Definition
| money held for unplanned expenditures |
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Term
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Definition
| money to be used for investment |
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Term
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Definition
-amount of funds available in banking system
-determined by the Fed |
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Term
| equilibrium interest rate |
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Definition
| -determined by money supply and money demand |
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Term
| expansionary monetary policy |
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Definition
-useful when economic growth is growing too slowly
-useful when unemployment is significant concern
-decrease reserve requirements, decrease discount rate, or buy government securities to decrease interest rates and increase AD
-goal is to increase economic growth and move back to full-employment |
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Term
| Restrictive monetary policy |
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Definition
-useful when economic output is growing too fast
-useful when inflation is significant problem
-increase reserve requirements, increase discount rate, or sell government securities to increase interest rates and decrease AD
-goal is to slow economy, reduce prices and inflation |
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Term
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Definition
horizontal-unemployment
vertical- inflation |
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Term
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Definition
-forecasts based on past information as well as current actions of other decision makers
-results include random error
-forward looking but make more accurate forecasts
-forecasts not always accurate because of random error |
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Term
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Definition
-only uses past information but do not focus on the current actions of other decision makers
-results include both systematic and random error
-forward looking but typically do not make completely accurate forecasts |
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Term
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Definition
-expresses relationship between inflation and unemployment
-shows consistent inverse realtionship between inflation and unemployment |
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Term
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Definition
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Term
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Definition
| -people do not forecast what will happen in the future |
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Term
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Definition
| same mistakes repeated over and over |
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Term
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Definition
| mistake that could not have been predicted |
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Term
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Definition
-US government tax on foreign goods sold in the US
-tax on imported goods
-decrease number of imports
-increase price of both imported and domestic goods
-benefit domestic producers and domestic government
-harm domestic consumers and foreign producers
-leads to increase in price of foreign goods sold and increase in price of same goods sold by domestic producers |
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Term
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Definition
-upper limit by the US government on the amount of foreign goods that are sold in the US
-decrease quantity of foreign goods sold and increase price of those goods
-decrease number of imports
-increase price of both imported and domestic goods
-benefit domestic producers and domestic government
-harm domestic consumers and foreign producers
-leads to increase in price of foreign goods sold and increase in price of same goods sold by domestic producers |
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Term
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Definition
| -compare value of one currency in relation to another |
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Term
| benefits from trade restrictions |
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Definition
-domestic producers
-domestic government |
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Term
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Definition
-found below demand and above price
-additional benefits obtained by buyers |
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Term
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Definition
-found below price and above supply
-additional benefits obtained by sellers |
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Term
| adversely impacted by trade restrictions |
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Definition
-foreign producers
-domestic consumers |
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Term
| national defense argument for trade restrictions |
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Definition
| -we should protect US businesses that are critical to national defense through the use of trade restrictions |
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Term
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Definition
| -we expect the real exchange rate to be one to one |
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Term
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Definition
-area of combines consumers and producer surplus increase, then overall well being of country has increased
-area of combined consumer and producer surplus decrease, then overall well being of country has decreased |
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Term
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Definition
| -US consumers worse off, US producers better off |
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Term
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Definition
| -US consumers are betters off, US producers are worse off (including workers) |
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Term
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Definition
| -if new company is founded in new industry in certain country, domestic government may want to establish trade restrictions to protect new operation for short period of time |
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Term
| preventing product dumping |
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Definition
-prevent foreign firms from selling goods below cost in the domestic market in an effort to gain monopoly power by forcing US firms out of business.
-tariffs create even greater losses for these firms by making product dumping less likely to take place |
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Term
| arguments for trade restrictions |
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Definition
-infant industry
-national defense
-prevent product dumping |
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Term
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Definition
| -goods produced in the US that are sold in another country |
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Term
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Definition
| -goods produced in another country and are sold in the US |
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Term
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Definition
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Term
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Definition
exports - imports
can only be positive |
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Term
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Definition
imports - exports
-can only be positive |
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Term
| appreciation of the dollar |
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Definition
-occurs if each dollar "buys" more units of a foreign currency
-US good becomes more expensive to foreign consumer
-Foreign good becomes less expensive to US consumer |
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Term
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Definition
-occurs if each dollar "buys" fewer units of a foreign currency
-US good becomes less expensive to foreign consumers
-foreign goods become more expensive to US consumers
-will increase AD for US goods and services |
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Term
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Definition
| - domestic price/foreign price |
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Term
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Definition
| - Us price * foreign equivalent price to 1 Us dollar |
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