Politics Ch 5,6,12

Front 1

Perestroika

Back 1

Economic reforms introduced by Gorbachev (Soviet Union 1980s)--> introduced market mechanisms and pressures to Soviet economy

Front 2

Glasnost

Back 2

Political reforms by Gorbachev--> unleash individual choice and broader citizen participation in political life

Front 3

Democratization

Back 3

Encourages choice in political arenas (like market exchange but for politics)

Front 4

Economic liberalism

Back 4

Theoretical framework that underpins today's modern global political economy: exchange w/in competitive markets

Front 5

Competitive Markets

Back 5

Decentralized mechanisms that coordinate the allocation, distribution, and use of the raw materials, labor and capital that go into economic activity

Front 6

Price mechanism

Back 6

Coordinates individual consumption preferences (demand)

Front 7

Demand

Back 7

Individual consumption preferences

Front 8

Supply

Back 8

Producers' activities

Front 9

Invisible hand

Back 9

An unseen force that guides self-interested individual behavior in competitive markets and promotes the welfare of society w/o deliberate intent

Front 10

Factors of production

Back 10

Labor, land and capital

Front 11

Factor endowment

Back 11

A mix of land, labor, and capital

Front 12

Land

Back 12

Physical resources available in nature

Front 13

Labor

Back 13

The efforts that men and women put into producing a commodity

Front 14

Capital

Back 14

A factor of production that does not occur naturally

Front 15

Productivity gains

Back 15

Improvements in efficiency--occur when a producer discovers a means to reduce inputs per unit of production

Front 16

Production possibilities curve

Back 16

The outer boundary of what a society could conceivably produce and consume given its resources and the preferences of its members

Front 17

Transaction Costs

Back 17

The costs of doing business or engaging in exchange relationships

Front 18

Uncertainty

Back 18

Confusion over property rights

Front 19

Monopoly

Back 19

When a single producer is able to manipulate the price of a commodity by affecting the supply of that commodity in a market

Front 20

Oligopoly

Back 20

Sellers are so few that the actions of any one of them will materially affect price and have a measurable impact on competitors and consumers

Front 21

Price takers

Back 21

No one individually controls the price

Front 22

Externality

Back 22

Transactions in competitive and efficient markets have no effect (costs or benefits) on third parties

Front 23

Free-riding

Back 23

Consumption of a commodity without contribution

Front 24

Negative externality

Back 24

ex. Acid rain in New England due to chemical use in the midwest

Front 25

Asymmetric Information

Back 25

One party to an exchange knows more about the commodity being exchanged than the other parties --> unfair advtg

Front 26

Incomplete Information

Back 26

ex. asymmetric information

Front 27

Pooling equilibrium

Back 27

When buyers with asymmetric info. have trouble distinguishing good sellers or good products from bad sellers or bad products

Front 28

Separating equilibrium

Back 28

Buyers can distinguish among products and sellers

Front 29

Market failure

Back 29

Societal resources are not allocated as efficiently as theoretically possible

Front 30

Absolute advantage

Back 30

If one trading partner is more capable and efficient at producing particular commodities, it should specialize in the production of such commodities and trade for other goods

Front 31

Labor theory of value

Back 31

More efficient producers have lower labor costs, --> measure of productivity per unit of production

Front 32

Comparative Advantage

Back 32

When the gaps in efficiency between two trading partners are greater for some products than others, one trading partner has a _____ in the product with the greatest gap in efficiency.

Front 33

Consumption Possibilities

Back 33

Expanded by engaging in trade and taking advantage of specialization

Front 34

Heckscher-Ohlin model

Back 34

Economic principle based upon differences across nations in their allocations of productive inputs (factor endowments)

Front 35

Factor intensities

Back 35

Relative quantities of the factors that are necessary to produce commodities (differ by commodity)

Front 36

Stolper-Samuelson theorem

Back 36

An extension of the Heckscher-Ohlin model, recognizes that the liberalization of trade benefits the abundant factors of production in an economy

Front 37

Balance of payments

Back 37

Giant thermostat--regulating and equilibrating trade and capital flows in the int'l political economy

Front 38

Current Account

Back 38

Describes the import and export of goods, services, and severa ancillary items

Front 39

Capital account

Back 39

comprises capital inflows ad outflows related primarily to investment, not consumption

Front 40

Foreign Direct investment (FDI)

Back 40

Investment in the control of productive facilities overseas

Front 41

Portfolio Investment

Back 41

Does not create control of an overseas facility

Front 42

Exchange-rate Mechanism

Back 42

Reflects the value of one currency versus another, provides the means of adjustment in the balance-of-payments mechanism and its equilibrating tendency