Economics Unit 5 Questions And Answers – Flashcards
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underground economy
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transactions by people who do not follow federal and state laws with respect to reporting earnings
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stagflation
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combination of inflation and stagnation( low economic activity)
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monetarism
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theory that deals with the relationship between the amount of money the Fed places in circulation and the level of activity in the economy
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devaluation
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lowering a currency's value in relation to other currencies by government order
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depreciation
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fall in the price of a currency through the actions of supply and demand
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import quota
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restriction imposed on the number of units of a particular good that can be brought into the country
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European Union
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organization of European nations whose goal is to encourage economic integration as a single market
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direct foreign investment (DFI)
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the purchase by foreigners of real estate and businesses in another countries
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foreign affiliates
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branches of multinational firms
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what are four types of unemployment?
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1) cyclical, 2) structural, 3) seasonal, 4)frictional
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who is the economist that is most often linked to monetarism?
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Milton Friendman
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what does the U.S gain from international trade?
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the U.S gains the ability to import the things they want
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why are foreign exchange markets necessary?
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businesses use it to exchange currency to import goods from other countries
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how can a nation restrict imports?
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through tariffs, quotas, and embargoes
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what is the difference between a revenue and protective tariff?
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a protective tariff is a tax on imports used to raise the cost of imported goods and thereby protect domestic producers, and a revenue tariff is a tax on imports used primarily to raise government revenue without restricting imports
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what is an embargo?
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a complete restriction on the import or export of a particular good or goods going to or coming from a specific country
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what does NAFTA stand for
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North American Free Trade Agreement an agreement designed to reduce and gradually eliminate tariff business between Mexico, Canada, and the U.S.
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what kinds of financial investments are traded in global markets?
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U.S government securities, foreign exchange and stocks
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why do foreigners purchase U.S. government securities?
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the purchase from the U.S. because we have a politically stable country
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what is an example of a cross-border investment?
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the European union conducts more direct foreign investment in western Europe than anywhere else
