Unit 1 Economics Review (1-4, 10)

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Scarcity
Scarcity
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Lack of resources. Limited resources for satisfying unlimited wants and needs.
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Factors of production
Factors of production
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all the economic resources needed to produce a society’s goods and services.
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Opportunity cost
Opportunity cost
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if we decide to use our resources (i.e. money) on one thing, we lose the opportunity to use it on something else at the moment in time.
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Natural Resources
Natural Resources
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raw materials from nature used to produce goods.
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Renewable Resources
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can be readily reproduced (i.e water, cattle, wheat, etc)
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Non-Renewable Resources
Non-Renewable Resources
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limited or less likely renewable (i.e. coal, iron, oil)
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Labor Resources
Labor Resources
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people needed to make the goods or services Skill / Unskilled Physical / Intellectual
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Capital Resources
Capital Resources
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things used to make goods and services (Equipment, buildings, materials, supplies)
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Entrepreneurial Resources
Entrepreneurial Resources
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used by people who recognize opportunities and start businesses (These best respond to society’s changing wants and needs) i.e. The idea to start a business
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Economics
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the study of how individuals and groups of individuals strive to satisfy their wants and needs by making choices. (The study of how and why people make choices).
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Basic Economic Questions
Basic Economic Questions
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Questions societies must answer to best use their resources to meet the wants and needs of it’s citizens / inhabitants. (Who? What? How?)
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Economic Systems
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methods societies use to distribute resources (essentially different ways to answer the three basic economic questions)
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Market Economy
Market Economy
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economic decisions are made in the market place. Can also be called a free market, private enterprise, or capitalism.
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Marketplace
Marketplace
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where buyers and sellers meet to exchange goods and services.
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Price
Price
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the amount of money given or asked for when goods and services are bought or sold.
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Supply
Supply
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the amount of goods or services producers will provide at various prices.
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Demand
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the amount or quantity of goods and services that consumers are willing to buy at various prices.
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Equilibrium Price
Equilibrium Price
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the point at which the quantity demanded and the quantity supplied meet. This is the best case scenario for a market economy.
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Profit Motive
Profit Motive
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the desire to make a profit, and profit is the reward for taking a risk with your business.
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Competition
Competition
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encourages businesses to offer higher quality products at lower prices to attract customers.
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Command Economy
Command Economy
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a central authority (i.e. government) makes the key economic questions. The government dictates what will be produced, how it will be produced, and who will get the goods. It owns and controls all the resources. This is the opposite of a market economy. Highly skilled workers may earn the same as low-skilled workers.
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Socialism
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moderate command economy. Very few private enterprises may exist.
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Mixed Economy
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contains both private and public enterprises. few nations have either a pure command or pure market economy.
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Service-Based Economy
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Early 1600’s, colonists bartered or traded goods and services.
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Agriculture-Based Economy
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1700’s, farming was a common way of life.
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Industry-Based Economy
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Mid 1850’s, the industrial revolution enabled the advent of big machines for producing goods.
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Information-Based Economy
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1900’s, rapid movement of information became possible with inventions of computers and other advanced communications.
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Economic Indicators
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Figures used to measure economic performance. These include GDP, Standard of living, unemployment rate, inflation, deflation, and national debt. These indicators measure things such as how much a country is producing, whether its economy is growing, and how it compares to other countries.
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Gross Domestic Product
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The total value of all the goods and services produced in a country in a given year. This is one of the most important economic indicators of the status of an economy.
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Standard of living
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The level of material comfort as measured by the goods and services that are available. The more goods and services produced per person, the higher this becomes.
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Unemployment Rate
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Measures the number of people who are able and willing to work but cannot find work during a given period.
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Inflation
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a general increase in the price of goods and services. The higher this is, the buying power decreases because it costs more to buy goods and services.
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Deflation
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a general decrease in the price of goods and services. This occurs when the supply of goods is greater than the quantity demanded.
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Budget Deficit
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When the government spends more on programs than it collects in taxes.
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The Federal Reserve
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The government agency that that guides the economy by REGULATING the amount of MONEY in circulation AND controlling INTEREST RATES.
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Frictional Unemployment
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Unemployment caused by changing jobs.
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Structural Unemployment
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new technology replaces workers, requiring new skills, or companies merge and eliminate jobs. https://o.quizlet.com/–dykhuHCU1IL880y6l8YA_m.jpg
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Seasonal Unemployment
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workers are only needed part of the year.
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Cyclical Unemployment
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Unemployment that relates to the trends in growth and production that occur within the business cycle.
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FDIC
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The Federal Deposit Insurance Corporation is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system
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Black Tuesday
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October 29, 1929 – Marked the beginning of the great depression.
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The Great Depression
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1929 to 1933, GDP decreased nearly 50% and unemployment rose more than 800%
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Prosperity
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A peak in economic activity. Unemployment is low, GDP is high, new businesses open, etc.
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Recession
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Economic activity slows down. GDP lowers, demand slows down, unemployment increases.
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Ripple Effect
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down turns in major industries can bring on a recession.
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Depression
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a deep recession that effects the entire economy and lasts for several years.
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Ethics
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Moral principals by which people conduct themselves personally, socially, and professionally.
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Business Ethics
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Rules based on moral principals about how businesses and employees should conduct themselves. (i.e. providing safe products, creating jobs, treating employees fairly, protecting the environment, and being truthful about their financial situation.)
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Bribery
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Excessive gift giving (considered unethical in the US but not in all countries)
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Code of Ethics
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A set of guidelines for maintaining ethics in the workplace.
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Sweatshop
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A shop or factory in which workers are employed for long hours at low wages and under unhealthy conditions.
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OSHA
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Occupational Safety and Health Administration, sets and enforces work-related health and safety rules.
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Conflict of Interest
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Conflict between self interest and professional obligations.
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Nepotism
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the practice among those with power or influence of favoring relatives or friends, especially by giving them jobs.
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Social Responsibility
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The duty to do what is best for the good of society.
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Integrity
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the quality of being honest and having strong moral principles; moral uprightness.
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FDA
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Food and Drug Administration – a federal agency that from dangerous or falsely advertised products. This is one way to help ensure businesses maintain responsibility to customers.
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Responsibility to Customers
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Examples: Truthful advertising, Fair competition, offering a safe product at a reasonable price, etc.
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Responsibility to Employees
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Examples: Providing work experience for people with limited job skills, promoting volunteerism, providing employees safe working conditions, equal treatment, and fair pay, etc.
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Equal Pay Act
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Passed in 1964, requires that men and women be paid the same wages for doing equal work. This gap in wages still exists though.
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Americans with Disabilities Act
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Bans discrimination against people with physical or mental disabilities. More than 50 million workers are likely to be covered by this law.
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Responsibility to Society
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Examples: businesses should protect the environment.
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EPA
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Environmental Protection Agency (est. 1970) – enforces rules that protect the environment and control pollution.
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Sarbanes-Oxley Act
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Mandates truthful reporting and makes the CEO more accountable for the actions of the financial managers of a firm.
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Volunteerism
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the use or involvement of volunteer labor, especially in community services.
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Global Economy
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the interconnected economies of the nations of the world.
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International trade
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involves the exchange of goods and services between nations.
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Multinational Corporation
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a company that does business in many countries and has facilities and offices around the world. i.e Sony, McDonald’s, etc.
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Trade
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Has multiple meanings, such as, a specific area of business or industry, skilled occupation, people that work in a specific area of business, or lastly as an activity of buying and selling goods and services in domestic or international markets.
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Domestic Trade
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the production, purchase, and sale of goods and services WITHIN a country.
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World Trade
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the exchange of goods and services across international boundaries. This is necessary because a country may not have the necessary means or raw materials to produce or offer the good themselves.
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Imports
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Goods and services that one country BUYS from another country.
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Exports
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Goods and services that one country SELLS to another country.
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Specialize or specialization
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to focus on a particular activity, area, or product. This builds and sustains a market economy.
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Comparative Advantage
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the ability of a country to produce a particular good or service more efficiently than another country or company.
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Currency
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Another name for money, with which countries have to pay for products and services.
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Foreign Exchange Market
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to trade with another country, businesses and countries must convert their money into that nation’s currency, which takes place in this market.
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Exchange Rate
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The price at which one currency can buy another currency. These rates change daily. The amount a country’s currency is worth depends on the number of other countries that want to buy it.
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Price
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Companies follow the change in exchange rates to find the best prices for products.
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Protectionism
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the practice of the government putting limits on foreign trade to PROTECT businesses at home.
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Trade Barriers
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To limit competition from other countries.
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Tariff
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a tax placed on imports to increase their price in the domestic market.
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Quota
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a limit on the quantities of a product that can be imported.
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Embargo
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a ban on the import or export of a product. These are rare and usually are used against another country for political or military reasons.
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Free Trade
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Occurs when there are few or no limits on trade between countries.
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Trade Alliances
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Nations form these in order to reduce limits on trade.
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NAFTA
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North American Free Trade Alliance, formed between USA. Canada, and Mexico.
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EU
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European Union, a trade alliance between Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
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ASEAN
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Association of Southeast Asian Nations, a trade alliance between Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
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Balance of Trade
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the difference in value between a country’s imports and exports over a period of time.
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Trade Surplus
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A country exports more than it imports.
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Trade Deficit
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A country imports more than it exports.

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