Ecn306 Exam 1

Front 1

economic interdependence

Back 1

All aspects of a nation's economy are linked to the economies of its trading partners

Front 2

globalization

Back 2

the process of greater interdependence among countries and their citizens

Front 3

What drives globalization?

Back 3

1. Technology
a. Lowers transportation costs
b. Increases ease of which communication is conducted
c. Increased production ability
2. Multilateral trade negotiations
a. Tariffs have come down from back in the 1940s
(These two things are Lower Trade Barriers and Increasing Liberalization of trade)

Front 4

What drove the first wave of globalization and who was primarily involved?

Back 4

The invention of steamboats and railroads. It was primarily involved with the US and Europe.

Front 5

What brought the first wave of globalization to an end?

Back 5

World War I

Front 6

What is the main feature of the second wave of globalization?

Back 6

Developing countries were left behind while countries that were already developed flourished.

Front 7

agglomeration economies

Back 7

a rich country specializes in manufacturing niches and gains productivity through groups of firms clustered together, some producing the same product and others connected by vertical linkages

Front 8

What are the main features of the current wave of globalization?

Back 8

Outsourcing of labor, less immigration, more developing countries have broken into the internationalization scene

Front 9

Which nation is the greatest exporter in the world?

Back 9

United States

Front 10

Openness Ratio

Back 10

Exports and imports as a percentage of GDP

(Exports + Imports)/GDP

Front 11

Which countries tend to be more reliant on International Trade? Large or small countries?

Back 11

Small Countries

Front 12

What dominates the US trade today?

Back 12

Manufactured Goods and Services

Front 13

law of comparative advantage

Back 13

nations can gain by spending time on the things that they have a relative advantage in or things they do well

Front 14

Increase in competition resulting in higher quality products and less monopolies are characteristics of what?

Back 14

International trade

Front 15

Mercantilists

Back 15

Maintain high levels of exports while minimizing imports

Front 16

price specie flow doctrine

Back 16

the ideas of the mercantilists would only produce a favorable trade balance for a short term. this is because prices would go up and eventually goods could be had for cheaper if people imported them from elsewhere

Front 17

labor theory of value

Back 17

assumes that labor is the only factor of production and the cost of a good depends on the amount of labor used to produce it

Front 18

absolute advantage

Back 18

where one nation has an advantage over another nation when it comes to producing a certain good

Front 19

comparative advantage

Back 19

where one country has an absolute advantage in all products. the country with the absolute advantage will produce the item they have the largest absolute advantage in and the other country will produce the item that they have the smallest absolute disadvantage

Front 20

Marginal rate of transformation

Back 20

slope of a PP curve. Change in one item/ change in the other. also called opportunity cost

Front 21

autarky

Back 21

absence of trade

Front 22

theory of reciprocal demand

Back 22

terms of trade are determined by the relative strength of each country's deamnd for the other country's product

Front 23

importance of being unimportant

Back 23

if one nation is significantly larger than the other nation, the larger nation will experience fewer gains from trade and the smaller country will gain more from trade

Front 24

commodity terms of trade

Back 24

international exchange ratio
(export price/import price)*100

Front 25

factor endowment theory

Back 25

a country will export those goods that it makes the most easily with its abundant factors (resources)

Front 26

in factor endowment theory what are the determinants of comparative advantage?

Back 26

technology, resource endowments, and tastes and preferences

Front 27

factor price equalization

Back 27

when U.S. produces more using its abundant resource capital its demand for capital goes up, when china imports the capital from the U.S. their demand for capital goes down. this will cause price to go up for the u.s. and price to go down for china

Front 28

stolper samuelson theorem

Back 28

using the abundant resource makes that resource more scarce in the region. thus increase in demand makes the price go up

Front 29

specific factors

Back 29

factors that don't move easily from one industry to another

Front 30

interindustry specialization

Back 30

each nation specializes in a particular industry that it has a comparative advantage in

Front 31

intraindustry specialization

Back 31

focusing on a particular product or groups of products within a particular industry

Front 32

intraindustry trade

Back 32

trading for goods that are similar. exporting and importing computers. Reasons for this are transportation costs, differentiation of goods, and seasonality of goods in certain regions

Front 33

product life cycle theory

Back 33

a country may be the first creator of a product and export it, lose their competitive advantage, then become an importer of that product

Front 34

consumer surplus

Back 34

the difference between the amount that buyers would be willing and able to pay for a good and the actual amount they do pay

Front 35

producer surplus

Back 35

the revenue producers receive over and above the minimum amount required to induce them to supply

Front 36

revenue effect

Back 36

the goverment's collection of duty. number of imports * the tariff

Front 37

redistributive effect

Back 37

transfer of consumer surplus in monetary terms to domestic producers

Front 38

protective effect

Back 38

the loss to the domestic economy resulting from wasted resources. resources that aren't ideal for producing a certain commodity are used and production costs go up

Front 39

consumption effect

Back 39

the decrease in consumption resulting grom the tariffs's artificially increasing the price of a commodity

Front 40

deadweight loss

Back 40

protective effect + consumption effect

Front 41

domestic production subsidy

Back 41

granted to producers of import competing goods

Front 42

export subsidy

Back 42

goes to producers of products to be sold overseas

Front 43

What offers a lower cost to a country? Subsidy or Tariff

Back 43

Subsidy- no welfare effect