Economics Test: Unit 2 – Flashcards
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absoloute advantage
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the ability to produce more of a given product using a given amount of resources
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comparative advantage
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the ability to produce a product most efficiently given all the other products that could be produced
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law of comparative advantage
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the idea that a nation is better off when it produces goods and services for which it has a comparative advantage
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export
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a good that is sent to another country for sale
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import
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a good that is brought in from another country for sale
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trade barrier
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a means of preventing a foreign product or service from frely entering a nation's territory
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tariff
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a tax on imported goods
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European Union
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a regional trade organization made up of European nations (EU)
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NAFTA
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agreement that will eliminate all tariffs and other trade barriers between Canada, Mexico, and the US
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exchange rate
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the value of a foreign nation's currency in terms of the home nation's currency
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trade surplus
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the result of a nation exporting more than it imports
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trade deficit
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the result of a country importing more than it exports
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balance of trade
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the relationship between a nation's imports and exports
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infant industry
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a new industry
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World Trade Organization/WTO
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a worldwide organization whose goal is freer global trade and lower tariffs
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development
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the process by which a nation improves the economic, political, and social well-being of its people
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developed nation
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country with a higher average level of material well-being
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less developed country
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nation with a low level of material well-being
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industrialization
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the extensive organization of an economy for the purpose of manufacturing
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infant mortality rate
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the number of deaths that occur in the first year of life per 1,000 live births
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foreign investment
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investment originating from other countries
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per capita GDP
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a nation's gross domestic product (GDP) divided by its total population
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"Brain Drain"
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the loss of educated citizens to the developed world
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What is the difference between Human and Physical capital?
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Human capital is the skills and knowledge gained through education and experience & physical capital is human made goods used to produce goods and services.
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What is specialization, and how does it relate to International Trade?
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It's the concentration of the productive efforts of individuals & firms on a limited number of activities.
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What motivates a country to impose a voluntary export restraint on its own products?
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protectionism
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What is a trade deficit?
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The result of a country importing more than it exports.
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What are some examples of protectionism related to national security?
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In the event of a war, the US would need steel and other products from heavy industries.
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How do tariffs protect infant industries?
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It shields a young industry from the competition of its more mature rivals.
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What did NAFTA do?
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It eliminated all tariffs and other trade barriers between Canada, Mexico, and the US by 2009.
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What is an import quota?
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It's a limit on the amount of a good that can be imported.
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What is absolute advantage?
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The ability to produce more of a given product using a given amount of resources.
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What does it mean if an individual, company or country has a comparative advantage over another?
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That country has a lower opportunity cost in that product.
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What is the currency of many members of the EU?
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Euros
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What are the arguments in favor of protectionism?
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They can protect jobs, infant industries, and safeguard national security.
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What is the impact on the whole economy if specialization occurs?
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It benefits the whole country because the country produces the product efficiently and it increases trade.
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What is the law of comparative advantage?
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The idea that a nation is better off when it produces goods and services for which it has a comparative advantage.
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What is the most used source of energy in terms of world economies? What is energy consumption associated with in developed countries?
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Fossil fuel, hydroelectricity, and nuclear energy. Low levels of energy indicate low levels of industrial activity and high levels of energy indicate high levels of industrial activity.
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List the indicators of a developed country.
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higher per capita GDP, higher energy consumption, industrialized labor force, large # of consumer goods, higher literacy rate, longer life expectancy, lower infant mortality rate, and strong infrastructure
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List the indicators of a developing country.
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lower per capita GDP, lower energy consumption, labor force based on agriculture & unspecialized, small # of consumer goods, lower literacy rate, shorter life expectancy, higher infant mortality rate, and weak infrastructure
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What does development refer to?
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It's the process by which a nation improves the economic, political, and social well-being of its people.
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What are some of the positives and negatives that occur when a country transitions from a centrally planned economy to a market economy?
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Positives: less government control Negatives: adjusting to new changes
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What is per capita GDP? Why is per capita GDP a better indicator than just GDP?
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It's a nations GDP divided by its total population. It's more adequate to compare living standards.
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What are some countries in transition or recently transitioned from command to mixed economies?
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Russia, China, & the Soviet Union
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How can population be a problem for developing countries?
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LCD's have rapid population growth which makes sustaining a developing country more difficult.
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What is "Brain Drain"?
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It's the loss of educated citizens to the developed world.
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What political factors can slow development of countries?
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Government corruption, political instability, and from colonial dependency to central planning.
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Think back to Rich Nation, Poor Nation group activity. Why did your group pick the Richest nation and why was almost everyone wrong? Does a nation HAVE to have abundant natural resources to be wealthy? Why or why not?
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We picked the richest nation because it looked like they would have the most money by all their resources. A nation doesn't have to have abundant resources to be wealthy because just because they're good at producing a product doesn't mean they're making money from it.
