Economics Unit 5 Flashcard
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demand-pull is when prices rise as a result of demand while cost-push is when higher wages push prices up
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How does demand-pull inflation differ from cost-push inflation?
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cyclical, structural, seasonal, and frictional
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What are the four types of unemployment?
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excessive business and consumer demand
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What causes demand-pull inflation?
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higher wages
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What causes cost-pull inflation?
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when people deposit their income into savings accounts
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What are the leakages out of the circular flow of income and outcome?
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investment, exports, and government spending
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What are the injections of income into the circular flow of income and output?
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Milton Friedman
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Who is the economist that is often linked to monetarism?
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it takes up about 15% of the GDP in the US
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How important is international trade?
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it refers to the ability of a country to produce a particular good or service at a low cost
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How does a country determine whether it has a comparative advantage in the production of certain goods?
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climates constantly change due to inflation and other factors
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Why was it difficult to maintain a system of fixed rates of exchange?
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through tariffs, quotas, and embargoes
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How can a nation restrict imports?
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revenue tariff is used to raise government revenue while protective tariff is used to raise the cost of imported goods
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What is the difference between a revenue tariff and a protective tariff?
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low GDP per capital, emphasis on agriculture, poor health conditions, low literacy rates, and rapid population growth
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What are the five characteristics of developing nations?
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Per Capita GDP
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What is the tool that economists often use as a rough measure of a nation's prosperity?
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because of their low wage rates, few regulations, and abundant raw materials
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Why are foreign investors so attracted to developing nations?
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it runs foreign assistance programs for the government
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What is the function of USAID?
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-it encourages international trade -enhances the appeal of democracy and stops communism -to help protect the nations 's security
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What are three reasons for nations giving foreign aid to developing nations?
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local traditions, rapid population growth, misuse of resources, and trade restrictions
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What are the four obstacles of growth?
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US government securities, foreign exchange, and stocks
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What kinds of financial investments are traded in global markets?
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the purchase of foreigners of real estate
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What is the United State's share of worldwide direct investment?
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60,000
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How many multinationals exist in the world today?
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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 is an embargo?
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North American Free Trade Agreement
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What does NAFTA stand for?
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transactions by people who do not follow federal and state laws with respect to reporting earnings
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Underground company
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combination of inflation and stagnation
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Stagflation
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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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Monetarism
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lowering a currency's value in relation to other currencies by government order
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Devaluation
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fall in the price of a currency through the actions of supply and demand
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Depreciation
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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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Import quota
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organization of European nations whose goal is to encourage economic integration as a single market
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European Union
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the purchase by foreigners of real estate and businesses in other countries
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direct foreign investment (DFI)
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branches of multinational firms
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foreign affiliates
