Term
|
Definition
| The rate at which units of one produce can be exchanged for units of another product; The price of a good or service; The amount of one good or service that must be given up to obtain one unit of another service |
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Term
| What is COMPARATIVE ADVANTAGE? |
|
Definition
| A situation in which a person or country can produce a specific product at a lower opportunity cost than some other person or country; The basis for specialization and trade |
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Term
|
Definition
| The price paid in one's own money to acquire one unit of a foreign currency; The rate at which the money of one nation is exchanged for the money of another nation |
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Term
| What is the FOREIGN EXCHANGE MARKET? |
|
Definition
| A market in which the money of one nation can be used to purchase (can be exchanged for) the money of another nation; currency market |
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Term
|
Definition
| An increase in the value of the dollar relative to the currency of another nation, so a dollar buys a larger amount of the foreign currency and thus of foreign goods |
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Term
|
Definition
| The decrease in the value of the dollar relative to another currency, so a dollar buys a smaller amount of the foreign currency and therefore of foreign goods |
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Term
|
Definition
| The limit imposed by a nation on the quantity (or total volume) of a good that may be imported during some period of time |
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Term
| What are PROTECTIVE TARIFFS? |
|
Definition
| Any tariff designed to shield domestic producers of a good or service from the competition of foreign producers |
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Term
| What are NON-TARIFF BARRIERS |
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Definition
| Barriers other than protective tariffs that nations erect to impede international trade, including import quotas, licensing requirements, unreasonable produce quality standards, unnecessary bureaucratic detail in customs procedures, and so on |
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|
Term
| What are EXPORT SUBSIDIARIES? |
|
Definition
| A government payment to a domestic producer to enable the firm to reduce the price of a good or service to foreign buyers |
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Term
| What is the SMOOT-HAWLEY TARIFF ACT? |
|
Definition
| Legislation passed in 1930 that established very high tariffs. Its objective was to reduce imports and stimulate the domestic economy, but it resulted only in retaliatory tariffs by other nations |
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Term
| What is the RECIPROCAL TRADE AGREEMENT ACT? |
|
Definition
| Legislation passed in 1934 that aimed at reducing tariffs by use of negotiating authority and generalized reductions |
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Term
| What does NTR STATUS mean? |
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Definition
| Normal Trade Relations status; Aka Most-Favored-Nations status; Any subsequently reduced US Tariffs, resulting from negotiation with any other nation, would apply equally to any nation that signed the original agreement |
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Term
| What is the DOHA DEVELOPMENT AGENDA? |
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Definition
| The latest, uncompleted (as of 2010) sequence of trade negotiations by members of the WTO; named after Doha, Qatar, where the set of negotiations began. Aka Doha round |
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Term
|
Definition
| A group of countries having common identity, economic interests, and trade rules |
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Term
| What is the TRADE ADJUSTMENT ASSISTANCE ACT? |
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Definition
| A US law passed in 2002 the provides cash assistance, education and training benefits, health care subsidies, and wage subsidies (for persons age 50 or older) to workers displaced by imports or relocations of US plants to other countries |
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Term
|
Definition
| The practice of shifting work previously done by American workers to workers located abroad |
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Term
| What are the four main categories of economic flows? |
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Definition
| Goods and services flows; Capital and labor flows; Information and Technology flows; Financial Flows |
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|
Term
| How much do exports/imports account for the nations GDP? |
|
Definition
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|
Term
| Which nations are dominant in the world trade by volume? (5) |
|
Definition
| US, China, Japan, the western European nations, and Canada |
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|
Term
| What does SPECIALIZATION do? |
|
Definition
| Increase the total output available for nations that trade with one another |
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|
Term
| What ways can the government curtail imports and promote exports? (4) |
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Definition
| Protective tariffs; import quotas; nontariff barriers; export subsidies |
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|
Term
| What two major ways is world trade significant to the US? |
|
Definition
| The combined volumes of US imports and exports exceed those of any other single nation; The US is completely dependent on trade for certain commodities and materials that cannot be obtained domestically |
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Term
| What do Principle US Exports include? (4) |
|
Definition
| Agriculture products; chemicals; metals; aircraft |
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|
Term
| What do Principle US Imports include? (4) |
|
Definition
| Oil; household appliances; apparel; computers |
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|
Term
| Who is the US's most important trading partner? |
|
Definition
|
|
Term
| What ways is global trade facilitated? (3) |
|
Definition
| Improvements in transportation technology; Improvements in communications technology; General declines in tariffs |
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|
Term
| Who are the 4 major trading nations? |
|
Definition
| China, Germany, the US, and Japan |
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|
Term
| What is a DEMAND SCHEDULE? |
|
Definition
| Is a schedule or curve that shows the various amounts of a produce that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time |
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|
Term
| What is the LAW OF DEMAND? |
|
Definition
| The principle that, other things equal, an increase in a product's price will reduce the quantity of it demanded, and conversely for a decrease in price |
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Term
| What is the LAW OF DIMINISHING MARGINAL UTILITY? |
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Definition
| The principle that as a consumer increases the consumption of a good or service, the marginal utility obtained from each additional unit of the good or service decreases |
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|
Term
| What is the INCOME EFFECT? |
|
Definition
| A change in the quantity demanded of the product that results from the change in real income (purchasing power) caused by a change in the product's price |
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|
Term
| What is the SUBSTITUTION EFFECT? |
|
Definition
| A change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the product's price; The effect of a change in the price of a resource on the quantity of the resource employed by a firm, assuming no change in its output |
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Term
|
Definition
| A curve illustrating demand |
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Term
| What are the DETERMINANTS OF DEMAND? |
|
Definition
| Factors other than price that determine the quantities demanded of a good or service |
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Term
|
Definition
| Aka superior goods; A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant |
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|
Term
|
Definition
| A good or service whose consumption declines as income rises, prices held constant |
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|
Term
| What is a SUBSTITUTE GOOD? |
|
Definition
| One that can be used in place of another good |
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|
Term
| What is a COMPLEMENTARY GOOD? |
|
Definition
| One that is used together with another good |
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|
Term
| What is a CHANGE IN DEMAND? |
|
Definition
| A shift of the demand curve to the right (an increase in demand) or to the left (decrease in demand) |
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|
Term
| What is the CHANGE IN QUANTITY DEMANDED? |
|
Definition
| The movement from one point to another point, from one price-quantity combination to another, on a fixed demand curve |
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|
Term
|
Definition
| The schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period |
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|
Term
| What is the LAW OF SUPPLY? |
|
Definition
| As price rises, the quantity supplied rises; As price falls, the quantity supplied falls |
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|
Term
| What are the DETERMINANTS OF SUPPLY? |
|
Definition
| Factors other than price that determine quantities supplied of a good or service |
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|
Term
| What is a CHANGE IN SUPPLY? |
|
Definition
| A change in the schedule and a shift of the curve; An increase in supply shifts the curve to the right, a decrease in supply shifts the curve to the left |
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|
Term
| What is the CHANGE IN QUANTITY SUPPLIED? |
|
Definition
| The movement from one point to another on a fixed supply curve |
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|
Term
| What is the EQUILIBRIUM PRICE? |
|
Definition
| Aka market-clearing price; The price where the intentions of buyers and sellers match; The price where quantity demanded equals the quantity supplied |
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|
Term
| What is the EQUILIBRIUM QUANTITY? |
|
Definition
| The quantity at which the intentions of the buyers and sellers match, so that the quantity demanded and the quantity supplied are equal |
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|
Term
| What is PRODUCTIVE EFFICIENCY? |
|
Definition
| The production of any particular good in the least costly way |
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|
Term
| What is ALLOCATIVE EFFICIENCY? |
|
Definition
| The particular mix of goods and services most highly valued by society (minimum-cost production assumed) |
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|
Term
|
Definition
| A minimum price fixed by the government; A price at or above the price floor is legal; a price below it is not |
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|
Term
|
Definition
| Sets the maximum legal price a seller may charge for a product or service; A price at or below the ceiling is legal, a price above it is not |
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|
Term
| What are some reasons a demand curve would shift? (5) |
|
Definition
| Consumer tastes; The number of buyers in the market; Consumer income; The prices of substitute or complementary goods; Consumer expectations |
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|
Term
| How does demand influence the equilibrium price and quantity? |
|
Definition
| Increase in demand increases the equilibrium price and quantity; A decrease in demand decreases the equilibrium price and quantity |
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|
Term
| How does supply influence the equilibrium price and quantity? |
|
Definition
| Increase in supply reduces equilibrium price but increases quantity; A decrease in supply increases equilibrium price but reduces equilibrium quantity |
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|
Term
| How is the OTHER-THINGS-EQUAL ASSUMPTION violated? |
|
Definition
| Over time, the equilibrium price and quantity may change in directions that seem at odds with the laws of demand and supply |
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|
Term
| What is the OTHER-THINGS-EQUAL ASSUMPTION? |
|
Definition
| The assumption that factors other than those being considered are held constant; Aka "ceteris paribus" assumption |
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|
Term
| How does the government control prices? |
|
Definition
| In the form of ceilings and floors |
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|
Term
| What do price ceiling and floors actually do? (3) |
|
Definition
| They stifle the rationing function of prices, distort resource allocations, and cause negative side effects |
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|
Term
| How is the relationship between price and quantity demanded graphed? |
|
Definition
| Negative or inverse; Downsloping curve, Positive or direct; Upsloping curve |
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|
Term
| How are market demand curves found? |
|
Definition
| By adding horizontally the demand curves and the many individual consumers in the market |
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|
Term
| What is THE MARKET SUPPLY CURVE? |
|
Definition
| The horizontal summation of the supply curves of the individual producers of the product |
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|
Term
| What are some determinants of supply? (6) |
|
Definition
| Resource prices; Production techniques; Taxes or subsidiaries; Prices of other goods; Producer expectations; The number of sellers in the market |
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|
Term
| What is RATIONING FUNCTION OF PRICES? |
|
Definition
| The ability of market forces to synchronize selling and buying decisions to eliminate potential surpluses and shortages |
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|
Term
| Who are price ceilings designed to aid? |
|
Definition
|
|
Term
| Who are price floors designed to aid? |
|
Definition
|
|
Term
| What do effective price ceilings produce? |
|
Definition
| Persistent product shortages |
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|
Term
| What do effective price floors produce? |
|
Definition
| Persistent product surpluses |
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|
Term
|
Definition
| Either an increase in real GDP, or in real GDP per capita occurring over some period of time |
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|
Term
| What is REAL GDP PER CAPITA? |
|
Definition
| Real GDP per capita = Real GDP / Population |
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|
Term
|
Definition
| Approximate number of years required to double real GDP = 70/annual percentage rate of growth |
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|
Term
| How much has real GDP grown in the US? |
|
Definition
| At an annual average rate of about 3.2% since the 1950s |
|
|
Term
| How much had real GDP per capita grown in the US? |
|
Definition
| Roughly 2% annual rate since the 1950s |
|
|
Term
| What is MODERN ECONOMIC GROWTH? |
|
Definition
| Characterized by sustained and ongoing increases in living standards that can cause dramatic increases in the standard of living within less than a single human lifetime |
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|
Term
| What are LEADER COUNTRIES? |
|
Definition
| Countries that develop and use advanced technologies, which then become available to follower countries |
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|
Term
| What are FOLLOWER COUNTRIES? |
|
Definition
| Countries that adopt advanced technologies that previously were developed and used by leader countries |
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|
Term
| When and where did modern economic growth start? |
|
Definition
| In England in the late 1700s |
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|
Term
| Why do large differences in standards of living exist today? |
|
Definition
| The amount of time experienced by economic growth is a factor |
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|
Term
| How can poor following countries catch up to the richer leading countries? |
|
Definition
| By adopting their technology |
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|
Term
| What causes substantial differences in GDP per capita among technologically advanced leader countries? |
|
Definition
| Caused by the differences in the amount of labor supplied |
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|
Term
|
Definition
| Changes in the physical and technical agents of production which enable an economy to expand its potential GDP |
|
|
Term
|
Definition
| The increase in the level of aggregate demand that brings about the economic growth made possible by an increase in the production potential of the economy |
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|
Term
| What are EFFICIENCY FACTORS? |
|
Definition
| The capacity of an economy to combine resources effectively to achieve growth of real output that the supply factors (of growth) make possible |
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|
Term
| What is LABOR PRODUCTIVITY? |
|
Definition
| Real GDP = Hours of work X Labor productivity |
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|
Term
| What is GROWTH ACCOUNTING? |
|
Definition
| The bookkeeping of the supply-side-elements such as productivity and labor inputs that contribute to changes in real GDP over some specific time period |
|
|
Term
|
Definition
| The knowledge and skills that make a worker productive |
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|
Term
| What is ECONOMICS OF SCALE? |
|
Definition
| Reductions in per-unit production costs that result from increases in output levels |
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|
Term
| What is LABOR-FORCE PARTICIPATION RATE? |
|
Definition
| The percentage of the working-age population actually in the labor force |
|
|
Term
| What are some institutional structures that promote economic growth? (5) |
|
Definition
| Strong property rights; Patents; Efficient financial institutions; Education; and a competitive market system |
|
|
Term
| What are the four supply factors of economic growth? |
|
Definition
| Increases in quantity and quality of natural resources; Increases in quantity and quality of human resources; Increases in the stock of capital goods; Improvements of technology |
|
|
Term
| What do demand factors increase? |
|
Definition
|
|
Term
| What do efficiency factors achieve? |
|
Definition
| Allocative and productive efficiency |
|
|
Term
| How much did improvements in the labor productivity account for in the real GDP between 1990-2009? |
|
Definition
|
|
Term
| What have been the main contributors to the US productivity growth and economic growth? (5) |
|
Definition
| Improved technology; More capital; Greater education and training; Economics of scale; and better resource allocation |
|
|
Term
| What does labor productivity growth determine over long periods of time? |
|
Definition
| Economy's growth of real wages and its standard of living |
|
|
Term
| How can a nations capacity to produce output be illustrated graphically? |
|
Definition
| By an outward shift of its production possibilities curve |
|
|
Term
| What are the main reasons for the post-1995 increase in the average rate of production growth? (3) |
|
Definition
| Rapid technological change (Microchip & IT); Increasing returns and lower-per-unit costs; heightened global competition that holds down prices |
|
|
Term
| What are the main sources of increasing returns in recent years? (5) |
|
Definition
The use of more specialized inputs as firms grow;
The spreading of development costs;
Simultaneous consumption by consumers;
Network effects;
Learning by doing |
|
|
Term
| What was the real GDP percentage in the recession year of 2009? |
|
Definition
|
|
Term
| What was the real GDP per capita percentage in the recession year of 2009? |
|
Definition
|
|
Term
| The growth of real GDP is more useful when measuring what? (2) |
|
Definition
| Military potential or political preeminence |
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|
Term
| How can the real GDP increase, while the real GDP per capita decline? |
|
Definition
| Dramatic increase in population within the same period |
|
|
Term
| What are the 2 major reasons why the growth rate would vary quarterly and annually? |
|
Definition
| Depending on a wide variety of factors such as the introduction of major new inventions and the economy's current position in the business cycle |
|
|
Term
| Who invented the steam engine, when was it invented? |
|
Definition
| Scottish inventor James Watt invented and perfected the steam engine in 1776, the informal date of the industrial revolution |
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|
Term
| Countries experiencing modern economic growth tend to move towards what type of government? |
|
Definition
| Democracy; Which was extremely rare before the start of the Industrial Revolution |
|
|
Term
| Culturally, The vast increases in wealth and living standards have allowed ordinary people for the first time in history to do what? |
|
Definition
| To have significant time for leisure activities and the arts |
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|
Term
| Socially, countries experiencing modern economic growth have done what? (3) |
|
Definition
| Abolished feudalism; Instituted universal public education; and largely eliminated sexism and racism from social norms and legal restrictions |
|
|
Term
| Where was the birthplace of economic growth? |
|
Definition
|
|
Term
| Why does the real GDP per capita in the richest leader countries typically grow by an average annual rate of just 2 or 3 percent per year? |
|
Definition
| Because inventing and implementing new technology is slow and costly. |
|
|
Term
| Why can poorer following countries grow much faster than the leader countries? |
|
Definition
| Because they can adopt the existing technology from the leader countries |
|
|
Term
| What are economic growth rates dependent on? |
|
Definition
| The rate at which new technology can be invented and applied |
|
|
Term
| Why would the GDP per capita be dramatically higher than that of other rich leader countries? |
|
Definition
| Having a larger fraction of population employed than the other leader countries; Having employees that work more hours per year than other leader countries |
|
|
Term
| The determinants of economic growth can be grouped into what? |
|
Definition
| Four supply factors; One demand factor; And one efficiency factor |
|
|
Term
| What are the four supply factors of economic growth? |
|
Definition
Increases in the quantity and quality of natural resources;
Increases in the quantity and quality of human resources;
Increases in the supply (or stock) of capital goods;
Improvements in technology |
|
|
Term
| What is the demand factor for economic growth? |
|
Definition
| To achieve the higher production potential created by the supply factors, households, businesses, and government must purchase the economy's expanding output of goods and services |
|
|
Term
| What is the efficiency factor of economic growth? |
|
Definition
| To reach its full production potential, an economy must achieve economic efficiency as well as full employment |
|
|
Term
| What is productive efficiency? |
|
Definition
| The use of resources in the least costly way possible |
|
|
Term
| What is allocative efficiency? |
|
Definition
| The production of the specific mix of goods and services that maximizes people's well-being |
|
|
Term
| How is the "best allocation" determined? |
|
Definition
| By expanding production of each good until its marginal benefit equals it marginal cost |
|
|
Term
| Normally, how does the economy move from one point on the previous production possibilities curve to a point on the expanded curve? |
|
Definition
| Increases in total spending match increases in production capacity |
|
|
Term
| What are the two fundamental ways society can increase its real output and income? |
|
Definition
Increasing its inputs of resources;
Increasing the productivity of those inputs |
|
|
Term
| What does the president's Council of Economic Advisors use? What what do they use it for? |
|
Definition
A system called growth accounting;
To assess the relative importance of the supply-side elements that contribute to changes in the real GDP. |
|
|
Term
| What are the two main groups of elements in growth accounting? |
|
Definition
Increases in the house or work;
Increases in labor productivity |
|
|
Term
| What are the 5 factors that explain changes in productivity growth rates? |
|
Definition
Technological advances;
The amount of capital each worker has to work with;
Education and training;
Economics of scale;
Resource allocation |
|
|
Term
| How much does technological advance contribute to productivity growth? |
|
Definition
|
|
Term
| How much does Quantity of Capital contribute to productivity growth? |
|
Definition
|
|
Term
| How much does Education and Training contribute to productive growth? |
|
Definition
|
|
Term
| How much does Economies of Scale and Resource Allocation contribute to productive growth? |
|
Definition
|
|
Term
| What are the several sources of increasing returns and economies of sale? (5) |
|
Definition
More specialized inputs;
Spreading of development costs;
Simultaneous consumption;
Network effects;
Learning by doing |
|
|
Term
| What is the ECONOMIC PRINCIPLE? |
|
Definition
| A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions |
|
|
Term
|
Definition
| A collection of specific economic units treated as if they were one unit |
|
|
Term
| The economic perspective stresses what 3 main things? |
|
Definition
Resource scarcity and the necessity of making choices;
The assumption of purposeful (or rational) behavior;
Comparisons of marginal benefit and marginal cost |
|
|
Term
| What is the economizing problem? |
|
Definition
| The need to make choices because economic wants exceed economic means |
|
|
Term
|
Definition
| Aka budget constraint; A schedule or curve that shows various combinations of two products a consumer can purchase with a specific money income |
|
|
Term
| What does the straight line budget constraint indicate? |
|
Definition
| Constant opportunity cost |
|
|
Term
| What are economic resources? |
|
Definition
| All natural, human, and manufactured resources that go into the production of goods and services |
|
|
Term
| What are the four categories of economic resources? |
|
Definition
Land;
Labor;
Capital;
Entrepreneurial Ability; |
|
|
Term
| What is entrepreneurial ability? |
|
Definition
| The human resource that combines the other resources to produce a product, makes nonroutine decisions, innovations, and bears risks |
|
|
Term
| What are the four main categories of economic resources also called? |
|
Definition
|
|
Term
| What are the four categories in the production possibilities model? |
|
Definition
Full employment;
Fixed resources;
Fixed technology;
Two goods; |
|
|
Term
| Whats the difference between consumer goods and capital goods? |
|
Definition
| Consumer goods satisfy our needs directly, while capital goods satisfy our needs indirectly by making possible more efficient production of consumer goods |
|
|
Term
| What is a production possibilities curve? |
|
Definition
| Displays the different combinations of goods and services that society can produce in a fully employed economy, assuming a fixed availability of supplies of resources and fixed technology |
|
|
Term
| What is the law of increasing opportunity costs? |
|
Definition
| As the production of a particular good increases, the opportunity cost of producing an additional unit rises |
|
|
Term
| What four major things does the production possibilities curve illustrate? |
|
Definition
Scarcity of resources implied by the area of unattainable combinations of output lying outside the production possibilities curve;
Choice among outputs is reflected in the variety of attainable combinations of goods lying along the curve;
Opportunity costs is illustrated by the downward slope of the curve
The law of increasing opportunity cost is reflected in the bowed-outward shape of the curve |
|
|
Term
| What is the comparison of marginal benefits and marginal costs needed for? |
|
Definition
| To determine the best or optimal output mix on a production possibilities curve |
|
|
Term
| What does unemployment cause the economy to do regarding the production possibilities curve? |
|
Definition
| Operate at a point inside its production possibilities curve |
|
|
Term
| What kinds of things are depicted as an outward shift of the productions possibilities curve? |
|
Definition
Increases in resource supplies;
Improvements in resource quality;
Technological advances |
|
|
Term
| What helps determine the future location of its production possibilities curve? |
|
Definition
| The economies present choice of consumer and capital goods |
|
|
Term
| What enables a nation to obtain more goods than its production possibility curve indicates? |
|
Definition
| International specialization and trade |
|
|
Term
| What are the three elements of economic perspective? |
|
Definition
Scarcity and choice,
Purposeful behavior,
Marginal analysis |
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|
