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International Trade
Midterm
35
Economics
Undergraduate 3
02/26/2013

Additional Economics Flashcards

 


 

Cards

Term
3 Questions to Answer in Economic Trade?
Definition
  • What are the Gains?
  • What should each country specialize in and trade?
  • What are the terms of trade that make it mutually advantageous?
Term
Mercantilism
Definition

It is okay for a country to trade internationally, as long as they export more than the import

  • Demands a positive balance for trade
Term
David Hume
Definition

Price-specie flow mechanism "Gold Standard"

  • How much gold you have is how much cash you would receive
  • Payments were only made in Gold
  • Surplus turning into deficit eventually (inflation)
Term
Why did Mercantilism Last?
Definition
  • Because countries immediately shipped out the gold they got in order to do other things (conquests, infrastructure).
  • This would generate inflation
Term
Neo-Mercantolism
Definition
  • Never going to run a trade deficit
  • Insecure nations
  • Japan, China
Term
Factors of Production
Definition
  • Land (natural resources)
  • Labor
  • Capital (means of production) "machinery"
Term
Labor Theory Value
Definition
Value of things are based upon how much labor was put into that product
Term
Adam Smith
Definition
  • Father of modern micro-economics (classical economist)
  • Wealth of Nations
  • Critiqued Mercantlism
  • Labor is the most important factor
Term
Why do we need economics?
Definition
Resources are limited/scarce
Term
Ricardo
Definition
  • opportunity cost
  • comparative advantage (what is the sacrifice each country makes to produce these products)
  • "When opportunity cost is the same, then they should not trade"
Term
Karl Marx
Definition
Term
Non classical economists
Definition
  • Specialize in one product, because it's price is cheaper
  • Relative Commodity Price

(expresses same currency, eliminated problem of the currency)

(all factors of production are involved)

Term
PPF Curve
Definition
  • Production Possibility Frontier Curve
  • (Is a locus)
  • All points are different combinations of two products which result in a production where all resources are used
  • (Full use of resources in a country)
Term
Locus
Definition
A combination of points that share one common characteristic
Term
MRT
Definition
  • Marginal Rate of Transformation
  • Slope of PPF
  • how much production of one product a nation must sacrifice in order to produce an additional unit
Term
Straight Line PPF's
Definition
  • Constant
  • Ratio is always the same for MRT
  • Specialization is complete
Term
Slope =
Definition

change in Y


change in X

 

Term
McDougle
Definition
  • Theory is helpful when the explain the past or help you predict the future
  • 80% success rate
  • When you are following someone's theory, must follow their recipe
  • 1Wus = 2Wuk (1937)
Term
Concave Curve from the Origin
Definition
  • Ever increasing slope
  • As you produce more and more of a product, you're giving up more and more of the other product
  • specialization is partial
Term
Convex Curve from the Origin
Definition
  • To see what consumers preferences are
  • Combination of 2 products which yield the same amount of utility (Consumption for pleasure)
  • Can never intercept
  • Goal is to reach highest possbile indifference curve
  • Ever decreasing opportunity cost
  • MRS
Term
Marginal Utility
Definition
  • Utility that comes from the consumption of an additional product
Term
Law of Diminishing Marginal Utility
Definition
When we consume more of a product, they will receive less units
Term
Autarky
Definition
Self Sufficiency
Term
MRS
Definition
  • Marginal Rate of Substitution
  • Hiw much consumers are willing to give up in order to get an additional unit
Term
Pareto Optimum
Definition
  • Autarky
  • Best you can achieve given the circumstances
  • 2 groups have reached the highest point of stability
Term
Heckscher-Ohlin
Definition
  • 2 countrys, 2 commodoties, 2 factors of production
  • "Factors of Production" are free to move domesticlaly, but not internationally
  • Goal is to reach economies of scale
Term
Constant Returns of Scale
Definition
Double input, double output
Term
Increase returns of scale
Definition
double input, more than double output
Term
Decrease returns of scale
Definition
double input, less than double of outpu
Term
Factor Intensity
Definition
Production of goods/ commodoties
Term
Factor abundance
Definition
Nations
Term
Wages and interet rates
Definition

W = Labor

r = K

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