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Chapters 1-8
Chapter 1-8
58
Economics
Undergraduate 4
02/23/2015

Additional Economics Flashcards

 


 

Cards

Term

 

 

 

Trade to GDP Ratio

Definition




(Exports+ Imports) / GDP

The ratio does indicate the barriers of trade it only indicates its importance in trade

 

Term

 

 

International Institutions 

Definition

 

 

Rules and Organizations that govern and constrain behavior

Term

 

 

Formal Institutions

Definition

 

 

 

 

Written Sets rules that explicitly state what is and is not allowed. 

Term

 

 

 

Informal Institutions

Definition

 

 

 

Customs or traditions that define appropiate behavior, but without legal enforcement.

Term

 

 

IMF
International Monetary Fund 

Definition

 

 

Main concern in macroecnomic stability

Term

 

 

International Institutions 

Definition

 

 

Assist development in non-Industrial economies

Original Purpose: to provide finance mechanisms to rebuild Europe after WWII

Term




Gains From Trade

Definition

 

 

 

The improvement in national welfare

How nations maximize their material welfare by specializing in goods and servinces that have the lowest relative cost

Term

 

 

 

OPEC

Definition

 

 

 

Oil Producing and Exporting Countries

Taxonomy of institution

Commodity or industry specific organizations

Term

 

 

 

An Inquiry of into the Nature and Causes of Wealth of Nations

Definition

 

 

Created by Adam Smith, 1776

1st Modern Statement of eceonomic theory 

Attacked mercantilism, 

Proved zero sum wrong

Voluntary exchange is a + sum  bc both nations gain

Term

 

 

 

Ricardian Model

Definition

 

 

Simple model

Analyzes that a policy of free trade maximizes a nation's material well-being

Term

 

 

 

Assumptions of the Ricardian Model 

Definition
  • Labor: the only input, cannot migrate across borders, completely mobile between sectors, fully empployed
  • Markets: Two outputs, perfect competition, no transportation or trade costs
  • Technology: Constant returns to scale, no changes in techonology or skills
Term

 

 

 

Productivity

Definition

 

 

the amount of output obtained from a unit of input

 

Term

 

 

 

Labor Productivity

Definition

 

 

 

(Units of output)/(hrs worked)

 

Term

 

 

 

Absolute productivity advantage

Definition

 

 

 

The absolute advantage held by a country that produces more of a certain good per hour worked than another

Term




Opportunity Cost

Definition

 

The value of the best forgone alternative to the activity actually chosen

 the value that it requires the economy to move out of its other producton

Term

 

 

PPC

Production Possibilities Curve

 

Definition

 

 

Curve that shows the trade off a country faces when choosing between two goods. 

Slope= opportunity cost

Term

 

 


Autarky

 

Definition

 

 

Complete absence of trade

Countries limited to wha they can produce at home

Trade allows coutnry to raise their consumption

Term



CPC

Consumption Possibilities Curve

Definition

 

 

a curve that is the rate at which the trade can occur 

Term




Comparative Advantage

Definition

achieved in a good if a country's opportunity costs are lower than those of the trading partner

The concept is based on the idea that nations maximize their material well-being when they use their resources where they have their highest value.m 

Term

 

 

 

HO Model

Definition
  • States that a country's factors of production are used to make each good give rise to productivity differences between coutries
  • Countries will export goods that require the intensive use of relatively abundant factors to produce, and import goods that require relatively scarce factors to produce
Term

 

 

Relative Abundance 

Definition

 

 

 

A factor that implies that in autarky its relative cost is less than in countries where it is relatively scarcer.

Term

 

 

 

Relatively Scarce 

Definition

 

 

A factor in the HO model  that implies that in ataurky resources are more expensive. 

Term

 

 

 

Derived demand

Definition

 

 

  • It is derived indirectly from the demand for the output that is used to produce
  • Equal demands for an input
  • The amount of income earned per unit of input depends on both the demand for inputs and the supply of inputs 
Term

 

 

 

The Stolper-Samuelson Theorem

Definition

 

  • Derived from the HO Model
  • An increase in the price of a good raises the income raises the income earmed by factors that are used intensively in its production
  • Ultimately, the effects on income of an opening of trade depends on the flexibility of the affected factors
Term

 

 

Stolper-Samuelson Therorem

Definition

 

 

Thoerem that assumes if an input is in high demand , its price is high and the inputs used to produce it receives higher returns

Term

 

 

 

HO Model 

Definition

 

 

Model that assumes:

  1. Multiple inputs-labor, capital, farmland
  2. Variations in the quality of inputs
Term

 

 

 

Intraindustry Trade

Definition

 

The international trade of products made within a country

Example: (steel-for-steel or bread-for-bread)

 

It is growing increasingly important in international trade especially between industrial countries 

Has forced economist to explain why countries often export the same goods they import

Term

 

 

 

Interindustry

Definition

 

 

International trade of products between two different industries

Example: Bread for steel 

Term



Intraindustry Trade

Definition

 

 

 

It is growing increasingly important in international trade especially between industrial countries 

Term

 

 

Economies of Scale

Definition

 

 

Decreasing average costs over a relatively large range of output (as opposed to constant or increasing costs)

They can be either internal or external economies of scale

Term

 

 

Internal Economies of Scale 

Definition

 

 

Are defined as falling average costs over a relatively large range of output

This leads to larger firms bc size confers a competitive advantage in the form of a lower average costs. 

Term

 

 

External Economies of Scale

Definition
  • lead to larger industries
  • When firms become more productive as the # of firms in the industry increases
  • larger # of producers in an area help create deep labor market and more speciallized skills
  • large geo location can lead to dense network of input suppliers

 

Term

 

 

Transparent

Definition

 

 

Barriers of trade that are obvious

Term

 

 

 

Non-Transparent

Definition

 

 

 

Barriers of trade that are hidden

Term

 

 

 

Quotas 

Definition

 

 

 

Directly Limit the quantiilty of imports; regulate the quantity of imports

Term

 

 

 

Tarrifs

Definition

 Indirect limit on imports; impose a tax on imports

Pt=Pw+t

When tarrifs are imposed

  • The consumtion of the imported good subsequently decreases.
  • Domestic production rises
  • Imports fall
Term

 

 

 

Consumer Surplus 

Definition

 

 

A value received by consumers in excess of the price they pay (can be measured only in if the demand curve is shown) 

 

Real savings to consumers 

 

Term

 

 

 

Q2

Definition

 

Domestic Consumption

 

Term

 

 

 

Prices, Output and Consumption

Definition

Assumptions:

  • There is only one price for the good Pw
  • Foreign producers are willing to supply us with all the units of the good we want at that price

 

Term

 

 

Imports

Definition

 

 

Q2-Q1

What domestic producers are not able to meet consumer demand

Term

 

 

 

Q1

Definition

 

 

Domestic Production

Term

 

 

 

Intellectual Property Rights and trade

Definition

Divided into:

  • Copy rigths and related rights for literally and artistic work
  • Industrial property rights for trade marks
  • Patents
  • Industrial Design
  • Geopraphical indicators
  • Layout of integrated circuits
Term

 

 

 

Intellectual Property Rights and trade

Definition

 

 

Rules for respecting trade

 

Rules negotiated during the Urugay Rounds with trade related aspects Intellectual Property Rights (TRIPS) agreement

Term

 

Tarrif Rates in World Major Economies

Definition
  • Tarrifs are higher in agriculture than in other sectors of the economy
  • Overlap between countries in the sectors they protect more rigorously. They tend to be labor intensiver sectors in which high income coutries have lost comparitive advantage. 
  • Overall levels of tarrif rates are relatively low, particularly for non-agricultural goods
Term

 

 

 

Logic of Collective Action

Definition
  • The cost of tarrifs and quotas are borne by a great many people; everyone pay a little for protection
  • The benefits of protection is concentrated in a few indsutries: few benefit a lot from protection
  • They is an assymetry in the incentives to oppose the policy:those benefiting from protection have greater incentives than those hurt by it to lobby for it. 
Term




Why Nations Protect Their Industries

Definition
  • Poorer regions rely more on tarrifs as  source of government revenue
  • Primary Goal is to generate income for the operation of govt services
Term

 

 

 

Protection in the United States

Definition
  • Obtained through direct action by the president throught these legal procedures:
  • Countervailing duties
  • Antidumping duties
  • Escape clause relief
  • Section 301 retaliation
Term

 



Countervailing Duties

Definition

 

 

 

A tarrif that is granted to a US industry that has been hurt by a foreing country's subsidizing its firms

Term

 

Subsidies

 

Definition
Allow foreign firms to sell their products at lower prices
Term

 



Antidumping Duties

Definition

A tarrif that is levied on an import that is sellling at a price below the product's fair value

 

Problems: Econ theory and legal definitons are not in agreement

Comparing domestic and foreign prices is diffcult

if coutries do not earn above avg profits it cannot maintain low costs elsewhere

Term




Escape Clause Relief

Definition
Temporary Tarrif on imports to allow a domestic industry to escape the pressure of imports and thus obtain a period of adjustment
Term

 

 

 

Section 301

Definition
A section of the US 1974 trade act that requires the  USTR to take action against any nation that persistently engages in unfair trade practices
Term

 

 

 

Harmonization Standards 

Definition

 

Two or more coutries adopt a common set of standards

Term




Mutual Recognition Standards

Definition

 

 

Countries maintain their own standards, but accept the standards of others as vaild and sufficent

Term

 

 

 

Seperate Standards

Definition

 

 

Countries maintain their own standards and refuse to recognize the standards of others

Term

 

 

Obstacles to economic Integration

Definition
  1. National laws and regulations adopted for strictly domestic reasons limit international commerce in an integrated econ environment
  2. Conflict over standards (
Term

 

 

International Labor Standards 

Definition
  1. Prohbition of forced labor
  2. Freedom of association
  3. the right to organize and bargain collectively
  4. an end to exploitation of child labor
  5. Nondiscrimination in employment
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