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36 Cards in this Set
- Front
- Back
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What must countries do when they cannot efficiently produce sufficient variety or quality of goods and services to meet domestic demand?
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Engage in trade.
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What is the effect of specialization and international trade on productivity?
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Increases productivity.
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Specialization and trade are mutually beneficial or “profitable” to the two nations.........
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if the comparative costs of production within the two nations differ
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When does a country have a comparative advantage?
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they can produce that product at a lower domestic opportunity cost than a potential trading partner.
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What is the definition of import?
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Bringing something in
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What is export?
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Sending something out
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What is the effect of exchange rates on U.S. imports and exports?
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Value of the U.S. dollar. Dollar stronger- goods are more expensive to them. Dollar weaker- goods are cheaper to them.
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What is the definition of GDP?
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The total market value of all final goods and services produced in a given year.
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What is the definition of final goods? (Write out)
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Goods and services that are purchased for final use by the consumer, not for resale or for further processing or manufacturing.
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What are the non-productions transactions?
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Financial transactions and second hand sales.
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Expenditure approach to GDP?
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Add up all of the spending on final goods and services that have taken place through out the year
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What factors do we use when measuring GDP using the expenditures approach? (Write them out)
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C+Ig+G+Xn: Consumer spending, Gross Investment, Government spending, Net Exports
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What is the definition of disposable income?
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Personal income equals personal taxes
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Nominal GDP vs. Real GDP
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inflation
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What is the definition of price index?
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A measure of the price of a specified collection of goods and services, called a “market basket” in a given year as compared to the price of an identical collection of goods and services in a reference year.
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Shortcomings of GDP as a measure of total output and well-being? (List 2 explain 1)
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a. Non-market activity.
b. Leisure time: activities that are not labor |
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Economists define and measure economic growth either …
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a. An increase in real GDP occurring over some time period.
b. An increase in real GDP per capita occurring over some time period |
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An economy that is experiencing economic growth is better able to?
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Meet consumer wants and solve social economic problems
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Growth lessens…
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The burden of scarcity
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What are the main sources of growth?
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Increased input, improved productivity
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What is the definition of productivity?
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Real output per unit of input.
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Most economists believe that the immediate cause of cyclical changes in the level of real output and unemployment is changes in…
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The level of total spending
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Once the economy nears full employment…
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Further gains in real output become more difficult to achieve
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What is the effect of the business cycle on durable goods?
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Durable goods are hit much harder in a downturn that non durable goods and services
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Why is the purchase of durable goods considered discretionary?
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It doesn’t have to be tended to. It can be put off and fixed later.
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What are the twin problems that arise from the business cycle?
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Inflation and unemployment
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What is the process of measuring the unemployment rate after dividing the total US workforce into three groups? (write out)
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a. Under 16 and/or institutionalized
b. Those not seeking work c. Work force |
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What are the types of unemployment?
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a. Frictional
b. Structural c. Cyclical |
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What is full employment?
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When there is no cyclical unemployment.
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Why will there always be some unemployment?
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It takes some time to find a job
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Natural Rate of employment:
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The number of job seekers equals the number of job vacancies.
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What is the definition of inflation?
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A rise in the general level of prices
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What is demand- pull inflation?
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Too much spending chasing too few goods.
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What is the main measure of inflation?
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Consumer Price Index (CPI)
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What does the CPI report?
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Reports the price of a market basket of consumer goods and services.
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Who is helped and hurt by inflation?
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a. Helps people with a fixed rate interest debt.
b. Hurts people with fixed rate income. |
