Economics Test 3 Review

Front 1

Pollution abatement-

Back 1

Reduction of the quantity of waste discharged into the environment.

Front 2

As pollution dicharge decreases...

Back 2

The marginal value of wastedischarge and the marginal cost of pollution abatement increases.

Front 3

Two criticisms of the Optimal-Pollution concept:

Back 3

- Problems of measurement.
- Problems of rights.

Front 4

Coase theorem-

Back 4

The proposition that problems of externalities will be resolved efficiently through private exhange, regardless of the initial assignment of property rights, provided that there are no transaction costs.

Front 5

What transaction costs are barriers to voluntary resolution of externalities?

Back 5

- Scientific and Technical uncertainties
- Leagal Uncertainties
- Inherent Costs of Negotiation.

Front 6

What are the government policies for controlling externalities?

Back 6

- Command and Control
- Private Litigation and Tort Law
- Emission Charges
- Emissions Trading

Front 7

Private Litigation and tort law:

Back 7

- Involves crimes of nuisance and trespass.
- Solutions involve Tagging pollutants to determine their source and posted bonds so that funds available to pay victims in the event of an accident.

Front 8

Emmission Charges:

Back 8

- Govenment impose a charge of a fixed amount per unit of waste on all emissions of a given kind of waste. In effect, a tax on pollution.
- Should encorage all pollution sources to cut back on their output of waste.
- Helps cause even charges on different sources of pollution.

Front 9

Emissions Trading:

Back 9

- Buyable permits that allow holders to discharge a specified level of waste.
- For various practical reasons, more widespread than emissions charges.

Front 10

Worlds largest importer and exporter?

Back 10

USA

Front 11

Absolute advantage-

Back 11

The ability of a country to produce a good at a lower cost, in terms of quantity of factor inputs, than the cost at which the good can be produced by its trading partners.

Front 12

In trading, what country will have the comparative advantage inproducing a good?

Back 12

The country in which the opportunity cost of that good is lower.

Front 13

Heckscher-Ohlin Theorem-

Back 13

The proposition that countries tend to export goods that make intensive use of the factors of production that the country possesses in relative abundance.

Front 14

Trade deficit-

Back 14

Amount by which imports exceed exports.

Front 15

GATT:

Back 15

- General Agreement on Tariffs and Trade.

- Replaced by WTO

Front 16

Protectionism-

Back 16

Any policy that is intended to shield domestic industries from import competitiion.

Front 17

WTO:

Back 17

- World Trade Organization
- Replaced GATT

Front 18

Tariff-

Back 18

A tax on imported goods.

Front 19

Import quotas-

Back 19

A limit on the quantity of a good that can be imported over a given period.

Front 20

EU:

Back 20

- European Union
- A Key aim of European union has been to eliminate all barriers to trade amont the major European countries, eventually leading to a situation in which trade among these countries is nearly as free as trade among the states of the US.

- Worlds largest unified economic zone inmost respects.

- Euro currency

-25 Countries

Front 21

NAFTA:

Back 21

- North American Free Trade Agreement

-

Front 22

AFTA:

Back 22

- ASEAN Free Trade Area.

Front 23

*Real-

Back 23

In economics, a term that refers to data that have been adjusted for the effects of inflation.

Front 24

GPD:

Back 24

- Gross Domestic Product
- A measure of the value of total output of goods and services produced within a nation's borders during a period of time.

Front 25

*Nominal-

Back 25

In economics, a term that refers to data that have not been adjusted for the effects of inflation.

Front 26

*Real Output-

Back 26

A synonym for real gross domestic product.

Front 27

*Total factor productivity-

Back 27

A measurement of improvements in technology and organization that allow increases in the output produced by givenquantities of labor and capital.`

Front 28

*natural level of real output-

Back 28

The trend of real GDP growth over time, also known as potential real output.`

Front 29

*Business cycle-

Back 29

A pattern of irregular but repeated expansion and contraction of aggregate economic activity.

Front 30

*Recession-

Back 30

A cyclical economic contraction that lasts six months or more.

Front 31

Unemployment rate-

Back 31

The percentage of the labor force that is unemployed.

Front 32

Employed-

Back 32

A term used to refer to a person who is working at least 1 hour a week for pay or at least 15 hours per week as an unpaid worker in a family business.

Front 33

Unemployed-

Back 33

A term used to refer to a person who is not employed but is actively looking for work.

Front 34

Labor force-

Back 34

The sum of all individuals who are employed and all individuals who are unemployed.

Front 35

Discouraged worker-

Back 35

A person who would work if a suitable job were available but has given up looking for such a job.

Front 36

Natural rate of unemployment-

Back 36

The sum of frictional and structural unemployment; the rate of unemployment that persists when the economy is experiencing neither accelerating nor decelerating inflation.

Front 37

Employment population ratio-

Back 37

The percentage of the noninstitutional adult population that is employed.

Front 38

*Frictional unemployment-

Back 38

The portion of unemployment that is accounted for by the short periods of unemployment needed for matching jobs with job seekers.

Front 39

*Structural unemployment-

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The portion of unemployment that is accounted for by people who are out of work for long periods because their skills do not match those required for available jobs.

Front 40

*Cyclical unemployment-

Back 40

The difference between the observed rate of unemployment at a given point in the business cycle and the natural rate of unemployment.

Front 41

Inflation-

Back 41

A sustained dincrease in the average level of prices of all goods and services.

Front 42

Price stability-

Back 42

A situation in which the rate of inflation is low enough so that it is not a significant factor in business and individual decision making.

Front 43

*Transfer payments-

Back 43

Payments to individuals that are not made in return for work they currently perform.

Front 44

Indexation-

Back 44

A policy of automatically adjusting a value or payment in proportion to changes in the average price level.

Front 45

*Nominal interest rate-

Back 45

The interest rate expressed in the usual way: in terms of current dollars without adjustment for inflation.

Front 46

*Real interest rate-

Back 46

The nominal interest rate minus the rate of inflation.