Foreign Service Officer Test - Economics

Front 1

_______ are the two macro factors that seem to underlie the trend toward greater globalization.

Back 1

The decline in barriers to the free flow of goods, services, and capital Technological change

Front 2

_______ theory of international trade suggests that the production of products is likely to switch from advanced countries to developing countries over time.

Back 2

Product life-cycle

Front 3

3 core Classical Trade Theories?

Back 3

Absolute advantage (natural and acquired) Comparative advantage (David Ricardo) Factor Proportions theory ( Heckscher & Ohlin). Some empirical contradictions (Leontif).

Front 4

45 degree reference line

Back 4

the line along which planned real expenditures equal real GDP per year

Front 5

5 functions of the Fed?

Back 5

The Federal Reserve Board controls the supply of money, sets the discount rate, performs open market operations, regulates banks and other financial institutions, and supervises the FDIC.

Front 6

Above the mid-point on a straight-line demand curve, demand is ___________

Back 6

Elastic

Front 7

accelerator effect in economics?

Back 7

The accelerator effect in economics refers to a positive effect on private fixed investment of the growth of the market economy (measured e.g. by Gross Domestic Product). Rising GDP (an economic boom or prosperity) implies that businesses in general see rising profits, increased sales and cash flow, and greater use of existing capacity. This usually implies that profit expectations and business confidence rise, encouraging businesses to build more factories and other buildings and to install more machinery. (This expenditure is called fixed investment.) This may lead to further growth of the economy through the stimulation of consumer incomes and purchases, i.e., via the multiplier effect.

Front 8

According to former Secretary of Labor Robert Reich, the propensity of firms to outsource many of their productive activities to different suppliers around the world has resulted in the creation of __________ products.

Back 8

global

Front 9

According to our textbook, the growing integration of the world economy is:

Back 9

increasing the intensity of competition in a wide range of manufacturing and service industries

Front 10

According to Smith, countries should specialize in the production of goods for which they have an absolute advantage and then:

Back 10

prohibit the import of these goods from other countries

Front 11

According to the textbook, FDI is expensive because

Back 11

a firm must establish production facilities in a foreign country or acquire a foreign enterprise.

Front 12

Accounting cost

Back 12

Actual expense plus depreciation charges for capital equipment

Front 13

Accounting profit

Back 13

The difference between a firm's total revenue and its explicit costs.

Front 14

Acquisition

Back 14

A transaction in which a company buys another company and the purchaser has the right of direct control over the resulting operation.

Front 15

action time lag

Back 15

time between recognizing an economic problem and implementing policy to sole it; particularly long for fiscal policy (requires congressional approval)

Front 16

actual change in money supply

Back 16

actual money multiplier X change in total reserves

Front 17

ad valorem tariff?

Back 17

A Tariff based on a percentage of the price of a good.

Front 18

Adverse Selection

Back 18

Form of market failure resulting when products of different qualities are sold at a signle price because of asymmetric information, so that too much of the low-uality product and too little of the igh-quality product are sold. An example: The pattern in which insurance tends to be purchased disproportionately by those who are most costly for companies to insure.

Front 19

Allocative function of price

Back 19

Changes in prices direct resources away from overcrowded markets and toward markets that are underserved.

Front 20

Anchored inflationary expectations

Back 20

When people's expectations of future inflation do not change even if inflation rises temporarily.

Front 21

As the market in the U.S. and other advanced nations matures, the product becomes more standardized and price becomes:

Back 21

the main competitive weapon.

Front 22

asset demand

Back 22

holding money as a store of value instead of other assets such as certificates of deposit, corporate bonds, and stocks

Front 23

asset utilization ratio?

Back 23

A measure of how well a firm uses its assets to generate $1 in sales.

Front 24

assumption # 1 for balance sheets

Back 24

required reserve ratio is 10% for all transaction deposits

Front 25

assumption #2 for balance sheets

Back 25

transaction deposits are the bank's only liabilities; reserves at a Federal Reserve district bank and loans are the bank's only assets

Front 26

assumption #3 for balance sheets

Back 26

an individual bank can lend as much as it is legally allowed

Front 27

assumption #4 for balance sheets

Back 27

every time a loan is made to an individual (consumer or business), all the proceeds from the loan are put into a transaction deposit account; no cash is withdrawn

Front 28

assumption #5 for balance sheets

Back 28

depository institutions seek to keep zero excess reserves because reserves do not earn interest

Front 29

assumption #6 for balance sheets

Back 29

depository institutions have zero net worth

Front 30

Austrian school of economics?

Back 30

It is is a school of economic thought that rejects opposing economists' reliance on methods used in natural science for the study of human action, and instead bases its formalism of economics on relationships through logic or introspection called "praxeology". It is a subset of classical liberal school of economics. Friedrich Hayek was a famous member.

Front 31

automatic transfer accounts

Back 31

funds are automatically transferred from savings deposits to transactions depsits whenever the account holder makes a debit-card transaction or writes a check that would otherwise cause the balance of transactions deposits to become negative

Front 32

autonomous consumption

Back 32

the part of consumption that is independent of the level of disposable income; changes in autonomous consumption shift the consumption function

Front 33

Autonomous expenditure

Back 33

The portion of planned aggregate expenditure that is independent of output.

Front 34

Average benefit

Back 34

Total benefit of undertaking n units of an activity divided by n.

Front 35

Average expenditure

Back 35

Price paid per unit of good

Front 36

Average Product

Back 36

Output per worker.

Front 37

average propensity to consume (APC)

Back 37

the proportion of total real disposable income that is consumed

Front 38

average propensity to save (APS)

Back 38

the proportion of total real disposable income that is saved

Front 39

Backward Vertical FDI?"

Back 39

choosing to invest in economic activity upstream from the core business activity of the business unit.

Front 40

Balance of Payments (BOP)?

Back 40

A measure of how much money is going into or out of a country. If it is coming in, it is a positive balance. The BOP consists of the current, capital, and reserve accounts.

Front 41

Balance-of-payments deficit

Back 41

The net decline in a country's stock of international reserves over a year.

Front 42

Balance-of-payments surplus

Back 42

The net increase in a country's stock of international reserves over a year.

Front 43

Basic elements of a game

Back 43

The players, the strategies available to each player, and the payoffs each player receives for each possible combination of strategies.

Front 44

Basic Needs

Back 44

Qdequate food, clothing, and shelter.

Front 45

Below the mid-point on a straight-line demand curve, demand is ___________

Back 45

Inelastic.

Front 46

Benefit Budget

Back 46

An element of financial planning where all income is listed and compared to all expenditures. Often expenditure decisions need to be made to hold spending less than or equal to income.

Front 47

benefit of municipal bonds?

Back 47

They are always free from federal tax, and usually free from state and local tax. Because of this, their yields can be lower.

Front 48

Bequest saving

Back 48

Saving done for the purpose of leaving an inheritance.

Front 49

Bertrand model

Back 49

Oligopoly model in which firms produce a homogeneous good, each firm treats the price of its competitors as fixed, and all frims decide simultaneously what price to charge

Front 50

Better-than-fair gamble

Back 50

A gamble whose expected value is positive.

Front 51

Bilateral Monopoly

Back 51

Market with only one seller and one buyer

Front 52

Block Pricing

Back 52

Practice of Chargin different prices for different quanitites or "block" of a good.

Front 53

Board of Governors

Back 53

The leadership of the Fed, consisting of seven governors appointed by the president to staggered 14-year terms.

Front 54

board of Governors of the Federal Reserve System

Back 54

appointed by the president with the approval of the U.S. senate

Front 55

Bretton Woods triangle trade?

Back 55

Bretton Woods, then, created a system of triangular trade: the United States would use the convertible financial system to trade at a tremendous profit with developing nations, expanding industry and acquiring raw materials. It would use this surplus to send dollars to Europe, which would then be used to rebuild their economies, and make the United States the market for their products. This would allow the other industrialized nations to purchase products from the Third World, which reinforced the American role as the guarantor of stability. When this triangle became destabilized, Bretton Woods entered a period of crisis which lead ultimately to its collapse.

Front 56

Bundling

Back 56

Practice of selling two or more products as a package

Front 57

Business

Back 57

A private producing unit in our society.

Front 58

calculation of change in equilibrium real GDP

Back 58

multiplier X change in autonomous spending

Front 59

calculation of multiplier

Back 59

1/1-MPC or 1/MPS

Front 60

calculation of potential money multiplier

Back 60

1/required reserve ratio

Front 61

calculation of required reserves

Back 61

transaction deposits X required reserve ratio

Front 62

callable" bond?

Back 62

A bond that can be paid back early, thus forcing the buyer to find another place to put his money.

Front 63

Capital

Back 63

Resources and goods made and used to produce other goods and services. Examples include buildings, machinery, tools, and equipment.

Front 64

capital budget

Back 64

expenditures on investment items, such as machines, buildings, roads, and dams

Front 65

Capital good

Back 65

A long-lived good that is used in the production of other goods and services.

Front 66

Capital inflows

Back 66

Purchases of domestic assets by foreign households and firms.

Front 67

Capital losses

Back 67

Decreases in the value of existing assets.

Front 68

Capital outflows

Back 68

Purchases of foreign assets by domestic households and firms.

Front 69

Carl Menger?

Back 69

Founder of Austrian school of economics. Started the neoclassical revolution.

Front 70

Cash Flow Accounting System

Back 70

An accounting system entering expenses and revenues only when cash is received or paid out.

Front 71

Cash on the table

Back 71

Economic metaphor for unexploited gain from exchange.

Front 72

causes of inflation

Back 72

decline in long-run aggregate supply (continual reductions in economywide production) and if aggregate demand curve shifts rightward over time at a faster pace then the rightward progression of the long-run aggregate supply curve

Front 73

causes of shifts in the consumption function

Back 73

a change in any other relevant economic variable (besides real disposable income); # of such determinants is unlimited

Front 74

Chance" in Porter's Theory?

Back 74

wholly unpredictable occurances that you cannot mitigate

Front 75

Classical Growth Model

Back 75

A model of growth that focuses on the role of capital accumulation in the growth process.

Front 76

Closed Shop

Back 76

A firm where unions control the hiring.

Front 77

Coase theorem

Back 77

If at no cost people can negotiate the purchase and sale of the right to perform activities that cause externalities, they can always arrive at efficient solutions to the problems caused by externalities.

Front 78

Collective good

Back 78

A good or service that, to at least some degree, is nonrival but excludable.

Front 79

Commitment device

Back 79

A way of changing incentives so as to make otherwise empty threats or promises credible.

Front 80

Commitment problem

Back 80

A situation in which people cannot achieve their goals because of an inability to make credible threats or promises.

Front 81

Commodity Money

Back 81

Money that has an intrinsic value, that is, value beyond any value given to it because it is money. An example of this would be a gold coin that has value because it is a precious metal.

Front 82

Common Market

Back 82

Characterized by free movement of factors of production.

Front 83

Comparable Worth Laws

Back 83

Laws mandating comparable pay for comparable work.

Front 84

Comparative Business/Management?

Back 84

compared business practices/management in various countries that are different enough to justify study and separate treatment in the academic curriculum

Front 85

Compare the four basic types of economic systems.

Back 85

Traditional, are ecomies decided by social customs; market economies, are economiesdecided by individuals; command are by gov't; mixed econ are by a combination of markets and gov't

Front 86

Compensating wage differential

Back 86

A difference in the wage rateâ€"negative or positiveâ€"that reflects the attractiveness of a job's working conditions.

Front 87

Competition

Back 87

Attempts by two or more individuals or organizations to acquire the same goods, services, or productive and financial resources. Consumers compete with other consumers for goods and services. Producers compete with other producers for sales to consumers.

Front 88

Competitiveness

Back 88

The ability of a country to sell its goods to other countries.

Front 89

compound tariff?

Back 89

A TARIFF for a good that combines both a SPECIFIC TARIFF plus an AD VALOREM TARIFF.

Front 90

Concentration Ratio

Back 90

The value of sales by the topfirms of an industry stated as a percnetage of total industry sales.

Front 91

Conglomerate FDI?"

Back 91

Investing in business overseas that has no relationship to your core business.

Front 92

Conglomerate Merger

Back 92

The merging of relatively unrelated businesses.

Front 93

Consider the following scenario. The Netherlands exports tulip bulbs to almost every country in the world except Japan. The reason is that Japanese customs inspectors insist on checking every tulip bulb by cutting it down the middle (which destroys the bulb). The insistence on the part of the Japanese to inspect the bulbs in this manner (which makes it impractical for the Netherlands to export to Japan) is an example of a(n)

Back 93

administrative trade policy.

Front 94

Conspicuous Consumption

Back 94

The onsumption of goods not for one's direct pleasure, but simply to show off to others.

Front 95

Consumption expenditure

Back 95

Spending by households on goods and services such as food, clothing, and entertainment.

Front 96

Consumption function

Back 96

The relationship between consumption spending and its determinants, in particular, disposable (after-tax) income.

Front 97

consumption goods

Back 97

goods purchase by households for immediate satisfaction or to use up (ex. food, movies)

Front 98

Consumption possibilities

Back 98

The combination of goods and services that a country's citizens might feasibly consume.

Front 99

Contractual Intermediary

Back 99

A financial institution that holds and stores individuals' financial assets.

Front 100

convertible bonds?

Back 100

They carry a provision that the bond can be converted into shares of common stock under certain circumstances. Convertible bonds can be more attractive that bonds with no conversion provision, depending on the price of the underlying stock.

Front 101

Core rate of inflation

Back 101

The rate of increase of all prices except energy and food.

Front 102

Corporate Takeover

Back 102

An action in which another firm or a group of individuals issues a tender offer (that is, offers to buy yup the stock of a company) to gain control and to install its own managers.

Front 103

Corporation

Back 103

A business that is treated as a person, legally owned by its stockholders. Its stockholders are not liable for the actions of the corporate "person."

Front 104

Costly-to-fake principle

Back 104

To communicate information credibly to a potential rival, a signal must be costly or difficult to fake.

Front 105

Cost-plus regulation

Back 105

A method of regulation under which the regulated firm is permitted to charge a price equal to its explicit costs of production plus a markup to cover the opportunity cost of resources provided by the firm's owners.

Front 106

Cournot model

Back 106

Oligopoly model in which firms prdouce a homogenoues good, each firm treates the output of its competitors as fixed, and all firms decide simultaneously how much to produce

Front 107

Credentialism

Back 107

When the academic degrees, or credentials, become more important than the knowledge learned.

Front 108

Credibility of monetary policy

Back 108

The degree to which the public believes the central bank's promises to keep inflation low, even if doing so may impose short-run economic costs.

Front 109

Credible promise

Back 109

A promise to take an action that is in the promiser's interest to keep.

Front 110

Credible threat

Back 110

A threat to take an action that is in the threatener's interest to carry out.

Front 111

currency drains

Back 111

when deposits increase, public will want to hold more currency (currency in a person's wallet reamins outside banking system and cannot be held by banks as reserves from which to make loans)

Front 112

Currency Stabilization

Back 112

Buying and selling of a currency by the gobernment to offset temporary fluctuations in supply and demand for currencies.

Front 113

Customer discrimination

Back 113

The willingness of consumers to pay more for a product produced by members of a favored group, even if the quality of the product is unaffected.

Front 114

Customs Union

Back 114

characterized by common external tariffs.

Front 115

Deacquisition

Back 115

One company's sale of either parts of another company it has bought or parts of itself.

Front 116

debt utilization ratio?

Back 116

Debt utilization ratios measure how well the firm is utilizing debt and XYZ company's ability to repay the debt. Many novice investors believe that a company with no debt is superior. Having little debt on the balance sheet is generally very safe. But most companies assume debt to finance operations so the company can grow. General finance textbooks state that the ideal ratios is around 30%, due to leveraged buyouts the ratio of debt to assets or equity has been increasing.

Front 117

Decision tree (or game tree)

Back 117

A diagram that describes the possible moves in a game in sequence and lists the payoffs that correspond to each possible combination of moves.

Front 118

Degree of economies of scope

Back 118

Percentage of cost savings resulting when two or more products are produced jointly rather than individually

Front 119

Demand Conditions" in Porter's Theory?

Back 119

#NAME?

Front 120

Demand for money

Back 120

The amount of wealth an individual or firm chooses to hold in the form of money.

Front 121

Demand is unit elastic where on the demand curve?

Back 121

Demand is unit elastic at the MIDPOINT of the demand curve.

Front 122

Demand tends to become more or less elastic over time?

Back 122

More Elastic, because consumers have more time to adjust to a price change.

Front 123

Demand-Pull Inflation

Back 123

Inflation that o curs when the economy is at or above potential output.

Front 124

depository institutions

Back 124

financial institutions that accept deposits from savers and lend funds from those deposits out at interest

Front 125

Despository Institution

Back 125

A financila institution whose primary financial liability is deposits in checking or savings accounts.

Front 126

development banks?

Back 126

There are a few multilateral development banks throughout the world. Their purpose is to assist nations in economic development though loans etc.

Front 127

direct expenditure offsets

Back 127

actions on the part of the private sector in spending income that offset government fiscal policy actions; any increase in government in an area that competes with the private sector will have some direct expenditure offset

Front 128

Direct Regulation

Back 128

A kprogram in which the amount of a good people are allowed to use is directly limited by the government.

Front 129

Direct Relationship

Back 129

A relationship in which when one variable goes up, the other goes up too.

Front 130

dirty float in economics?

Back 130

It is when a country tries to manipulate the value of its floating currency.

Front 131

Disappearing political discourse

Back 131

The theory that people who support a position may remain silent, because speaking out would create a risk of being misunderstood.

Front 132

Discount rate

Back 132

The interest rate that the Fed charges commercial banks to borrow reserves.

Front 133

Discount window lending

Back 133

The lending of reserves by the Federal Reserve to commercial banks.

Front 134

Diseconomies of scope

Back 134

"means that there can be gains from trade, even when production possibilities frontier are identical"

Front 135

Disinflation

Back 135

A substantial reduction in the rate of inflation.

Front 136

dissaving

Back 136

a negative saving: a situation in which spending exceeds income; can occur when a household is able to borrow or use up existing assets

Front 137

Distorted assett allocation, black markets, and shortages can result from what economic regulation?

Back 137

Price controls.

Front 138

Distribution

Back 138

The allocation or dividing up of the goods and services a society produces

Front 139

domestic firm?

Back 139

A firm that has little or no international business activity.

Front 140

Dominant Firm

Back 140

irm with a large share of total sales that sets price to maximize profits, taking into account the supply response of smaller firms

Front 141

Dual Economy

Back 141

The existence of two sectors: a traditional sector and an internationally oriented modern market sector.

Front 142

Dunnings Eclectic theory?

Back 142

Monopolistic/Ownership Specific Advantage (OSA) explained why firms invested overseas, Internalization explained Which form of entry the firm should take and explained Where the firm should invest through Location Specific Advantage (LSA).

Front 143

Duration

Back 143

The length of an unemployment spell.

Front 144

duration gap?

Back 144

The duration gap is an accounting term for the difference between the duration of assets and liabilites. The duration gap measures how well cash flows for assets and liabilities are matched. When the duration of assets exceeds the duration of liabilities the duration gap is positive. A positive duration gap means greater exposure to rising interest rates; if interest rates go up then the price of assets fall more than the price of liabilities. Conversely, when the duration of assets is less than the duration of liabilities the duration gap is negative; if interest rates fall then the price of assets goes up less than the price of liabilities. Duration has a double-facet view. While a positive duration gap means greater risk, it also means that, on average, payables became due before receivables.

Front 145

Earned-income tax credit (EITC)

Back 145

A policy under which low-income workers receive credits on their federal income tax.

Front 146

E-commerce

Back 146

Buying and selling over the Internet.

Front 147

Economic Decision Rule

Back 147

If the marginal benefits of doing something exceed the marginal costs, do it. If the marginal costs of doing something exceed the marginal benefits, don't do it.

Front 148

Economic Efficiency

Back 148

Maximization of aggregate consumer and producer surplus

Front 149

Economic Force

Back 149

The necessary reaction to scarcity.

Front 150

Economic Functions of Government

Back 150

In a market economy, government agencies establish and maintain a legal system to regulate both commercial and social behavior, promote competition, respond to market failures by providing public goods and adjusting for externalities, redistribute income, and establish macroeconomic stabilization policies. To perform these functions, governments must shift resources from private uses by taxing and/or borrowing.

Front 151

Economic Growth

Back 151

An increase in real output as measured by real GDP or per capita real GDP.

Front 152

Economic Incentives

Back 152

Factors that motivate and influence the behavior of individuals and organizations, including firms and government agencies. Prices, profits, and losses are important economic incentives in a market economy.

Front 153

Economic loss

Back 153

An economic profit that is less than zero.

Front 154

Economic Policy

Back 154

an action (or inaction) taken by government to influence economic actions.

Front 155

Economic Principle

Back 155

A commonly held economic insight stated as a law or general assumption.

Front 156

Economic profit

Back 156

The difference between a firm's total revenue and the sum of its explicit and implicit costs; also called excess profit.

Front 157

Economic rent

Back 157

That part of the payment for a factor of production that exceeds the owner's reservation price, the price below which the owner would not supply the factor.

Front 158

Economic surplus

Back 158

The economic surplus from taking any action is the benefit of taking the action minus its cost.

Front 159

Economic System

Back 159

the combination of social and individual decision making a society uses to answer the 3 economic questions

Front 160

Economic Takeoff

Back 160

A stage when the development process becomes self-sustaining.

Front 161

Economic Union

Back 161

characterized by harmonization of economic policies of member nations, including introducing a common currency.

Front 162

Economically Efficient

Back 162

A method of production that produces a fiven level or output at the lowest possible cost.

Front 163

Economies of Scope

Back 163

Joint outuput of a single firm is greater than output that could e achieved by two different firms when each produces a single product

Front 164

effect time lag

Back 164

the time that elapses between the implementation of a policy and the results of that policy

Front 165

Efficiency

Back 165

Achieving a goal as cheaply as possible. Also: using as few inputs as possible.

Front 166

Efficiency Seeking?"

Back 166

Seeking to minimizing unit delivered cost to market, for both production and delivery (transportation, insurance, marketing, tariffs etc), to establish a portfolio of production sources reducing risk, obtaining knowledge including technology and skills.

Front 167

Efficiency wages

Back 167

"above-equilibrium wages paid by firms in order to increase worker productivity"

Front 168

Efficient (or Pareto-efficient)

Back 168

A situation is efficient if no change is possible that will help some people without harming others.

Front 169

Efficient Market

Back 169

A market where the quantity supplied=quantity demanded & the price of goods is set at the equilibrium price.

Front 170

Efficient markets hypothesis

Back 170

The theory that the current price of stock in a corporation reflects all relevant information about its current and future earnings prospects.

Front 171

Efficient point

Back 171

Any combination of goods for which currently available resources do not allow an increase in the production of one good without a reduction in the production of the other.

Front 172

Efficient quantity

Back 172

The efficient quantity of any good is the quantity that maximizes the economic surplus that results from producing and consuming the good.

Front 173

Effluent Fees

Back 173

Charges imposed by government on the level of pollution created.

Front 174

Embargo

Back 174

A total restriction on the import or export of a good.

Front 175

Employer discrimination

Back 175

An arbitrary preference by an employer for one group of workers over another.

Front 176

entitlements

Back 176

guarenteed benefits under a government program such as social security, medicare, or medicaid (often called noncontrollable expenditures)

Front 177

Entrepreneur

Back 177

an individual who sees an opportunity to sell an item at a price higher than the average cost of producing it.

Front 178

equation of exchange

Back 178

the formula indicating that the number of monetary units (Ms) times the number of times each unit is spent on final goods and services (V) is identical to the price level (P) times real GDP (Y)

Front 179

Equilibrate

Back 179

Describes the movement of the factors of a market set at the equilibrium price.

Front 180

Equilibrium Income

Back 180

The level of income toward which the economy gravitates in the short run.

Front 181

Euribor?

Back 181

Euribor (Euro Interbank Offered Rate) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the euro wholesale (or "interbank") money market. The Euro reference rates are based on this.

Front 182

excess reserves leakages

Back 182

depository institutions may wish to maintain excess reserves greater than zero (greater the excess reserves, the smaller the money multiplier)

Front 183

Excise Tax

Back 183

A tax that is levied on a specific good, such as tobacco.

Front 184

Expansion Path

Back 184

Curve passing through points of tangency between a firm's isocost lines and its isquants

Front 185

Expected value of a gamble

Back 185

The sum of the possible outcomes of the gamble multiplied by their respective probabilities.

Front 186

Explicit costs

Back 186

The actual payments a firm makes to its factors of production and other suppliers.

Front 187

Factor Endowments" in Porter's Theory?

Back 187

#NAME?

Front 188

Factor of production

Back 188

An input used in the production of a good or service.

Front 189

FACTOR PROPORTIONS THEORY?

Back 189

HECKSCHER & OHLIN - the pattern of international trade is based on differences in factor endowments rather than differences in productivity.

Front 190

Fair gamble

Back 190

A gamble whose expected value is zero.

Front 191

Fed Funds

Back 191

Loans of excess reserves banks make to one another.

Front 192

Federal Funds Interest Rate

Back 192

The discount interest rate at which the branch banks of the Fed loan money to other banks.

Front 193

Federal Funds Market

Back 193

a private market (made up mostly of banks) in which banks can borrow reserves from other banks that want to lend them (usually lent for overnight use)

Front 194

Federal Reserves notes

Back 194

largest component of U.S. currency (paper bills); distributed by the Fed

Front 195

fedwire

Back 195

electronic payments transfer system operated by the Federal Reserve System (about 2,000 U.S. depository institutions use to process interbank payments)

Front 196

Feudalism

Back 196

An economic system in which traditions rule.

Front 197

Fiat Money

Back 197

Money that has no intrinsic value, that is, its only value comes from the fact that a governing body backs & regulates the currency. This system only works if a gov't backs the money & regulates its production.

Front 198

fiduciary

Back 198

comes from the latin fiducia, which means "trust" or "confidence"

Front 199

fiduciary monetary system

Back 199

a system in which money is issued by the government and its value is based uniquely on the public's faith that the currency represents command over goods and services

Front 200

Financial Assets

Back 200

Assets such as stocks or bonds, whose benefit to the owner depends on the issuer of the asset meeting certain obligations.

Front 201

Financial Institution

Back 201

A business whose primary activity is buying, selling, or holding financial assets.

Front 202

Firm

Back 202

An economic institution that transforms factors fo production into goods and services.

Front 203

Firm's structure, strategy, and rivalry" imply in Porter's Theory?

Back 203

"Different nations are characterized by different management ideologies help or hinder the evolution of national competitiveness. Competition in an industry also tends to breeds rivalry and innovation, improved quality, cost reduction and investment in upgrading same."

Front 204

First degree price discrimination

Back 204

Practice of charging each customer her reservation price

Front 205

First-dollar insurance coverage

Back 205

Insurance that pays all expenses generated by the insured activity.

Front 206

Fisher effect

Back 206

The tendency for nominal interest rates to be high when inflation is high and low when inflation is low.

Front 207

Fitch Ratings?

Back 207

An international credit rating agency dual-headquartered in New York City and London. It is one of the three Nationally Recognized Statistical Rating Organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody's and Standard & Poor's.

Front 208

five levels of integration of a Trading Group?

Back 208

a. Free Trade Area b. Customs Union c. Common Market d. Economic Union e. Political Union

Front 209

fixed investment

Back 209

expenditures by firms on new machines and buildings (capital goods) that are expected to yield a future stream of income

Front 210

Flow

Back 210

A measure that is defined per unit of time.

Front 211

For COMPLEMENTS, the cross-price elasticity of demand is - or +?

Back 211

For COMPLEMENTS, the cross-price elasticity of demand is NEGATIVE?

Front 212

For INFERIOR GOOD, the income elasticity of demand is - or +?

Back 212

NEGATIVE

Front 213

For NORMAL GOODS, the income elasticity of demand is - or +?

Back 213

POSITIVE

Front 214

For Substitutes, the cross-price elasticity of demand is - or +?

Back 214

For substitutes, the cross-price elasticity of demand is POSITIVE

Front 215

Foreign Business?

Back 215

domestic business operating in foreign countries

Front 216

Formula for Total Earnings

Back 216

Total Earnings = Wage x Quantity of Labor Demanded

Front 217

Forward Vertical FDI?"

Back 217

choosing to invest in economic activity downstream from the core business activity of the business unit.

Front 218

four primary motives for engaging in FDI?

Back 218

a. Resource seeking b. market Seeking c.Efficiency Seeking d.Responding to Competitive dynamics

Front 219

Free Trade Association

Back 219

A group of countries that have reduced or eliminated trade barriers among themselves.

Front 220

Full Convertibility

Back 220

An exchange rate system in which individuals may change dollars into any currency they want for whatever legal purpose they want.

Front 221

Function of the Federal Reserve System #1

Back 221

supplies the economy with fiduciary currency (paper currency known as Federal Reserve notes); changes throughout the yr (ex. demands for paper currency are largers during the holiday seasons)

Front 222

Function of the Federal Reserve System #2

Back 222

provides payment-clearing systems: long operated systems for transmitting and clearing payments

Front 223

Function of the Federal Reserve System #3

Back 223

holds depository institutions' reserves

Front 224

Function of the Federal Reserve System #4

Back 224

acts as the government's fiscal agent (helps the government collect certain tax revenues and aids in the purchase and sale of government securities)

Front 225

Function of the Federal Reserve System #5

Back 225

supervises depository institutions: Fed periodically and without warning examine depository institutions to see what kinds of loans have been made, what has been used as security for the loans, and who has recieved them

Front 226

Function of the Federal Reserve System #6

Back 226

acts as the "lender of last resort" (the Federal Rserve's role as an institutions that is willing and able to lend to a temporarily illiquid bank that is otherwise in good financial condition to prevent the bank's illiquid position from lending to a general loss of confidence in that banks or in others)

Front 227

Function of the Federal Reserve System #7

Back 227

regulates the money supply

Front 228

Function of the Federal Reserve System #8

Back 228

intervenes in foreign currency markets (attempts to keep the value of the dollar from changing by buying and selling U.S. dollars in foreign exchange markets)

Front 229

Gains from specialization and trade are always possible as long as .................

Back 229

Gains from specialization and trade are always possible as long as OPPORTUNITY COSTS DIVERGE

Front 230

Galton's Fallacy

Back 230

"higher growth rates imply eventual `convergence' i.e. While the poor countries might have higher percentage growth rates, this does not mean that they are closing the absolute output gap with rich countries"

Front 231

Game tree

Back 231

See Decision tree.

Front 232

generic definition for globalization?

Back 232

the trend towards a more integrated and interdependent global Economic systems

Front 233

Global Corporation

Back 233

Corporation with substantial operations on bothe the production and sales sides in more than one country.

Front 234

Global firm?

Back 234

A globally integrated company that tries to achieve and experience curve economies. Products tend to be largely undifferentiated and location of production is chosen to achieve "Minimized unit delivered cost to Market" with largely centralized operations.

Front 235

Globalization results in a greater degree of __________ across markets than would be present otherwise.

Back 235

homogeneity

Front 236

Gold Specie Flow Mechanism

Back 236

The long-run adjustment mechanism that maintained the gold standard.

Front 237

Goods

Back 237

Tangible objects that satisfy economic wants

Front 238

Government Action" in Porter's Theory?

Back 238

actions by government that could have a positive or negative effect of foreign business...

Front 239

Government Bonds

Back 239

Bonds issued by the gov't & bought & sold by the Fed as a form of monetary policy to manipulate the money supply.

Front 240

graduated income tax?

Back 240

An income tax that takes proportionately more from higher wage earners

Front 241

greenfield investment?

Back 241

This is foreign direct investment that builds new factories or infastructure. It is the type of FDI most sought by host countries because it leads to infastructure and knowledge transfers.

Front 242

Head tax

Back 242

A tax that collects the same amount from every taxpayer.

Front 243

Health maintenance organization (HMO)

Back 243

A group of physicians that provides health services to individuals and families for a fixed annual fee.

Front 244

holding co mpany?

Back 244

Business owning a majority of stock in member companies and therefore able to dictate common policy. Warren Buffett's Berkshire Hathaway is one of the largest publicly traded holding companies; it owns numerous insurance companies, manufacturing businesses, retailers, and other companies.

Front 245

Horizontal FDI?"

Back 245

Investing in the same economic activity abroad as one does at home.

Front 246

Horizontal Merger

Back 246

The combining of two companies in the same industry.

Front 247

horizontal short-run aggregate supply curve

Back 247

there is excessive unemployment and unused capacity in the economy (classical assumptino of everlasting full employment no longer holds)

Front 248

Hostile Takeover

Back 248

A merger in which the firm being taken over doesn't want to be taken over.

Front 249

How can firms acheive "first mover advantage?"

Back 249

Investing in becoming a first mover requires a large allocation of cash.

Front 250

How does the Bureau of Labor Statistics calculate unemployment?

Back 250

egularly gathers data from 60,000 households to compute the unemployment rate.

Front 251

How often do treasury bills pay interest?

Back 251

Never. Only T-notes and T-bonds pay interest twice a year. T-bills are simply sold at a discounted price.

Front 252

Human capital theory

Back 252

A theory of pay determination that says a worker's wage will be proportional to his or her stock of human capital.

Front 253

Hurdle method of price discrimination

Back 253

The practice by which a seller offers a discount to all buyers who overcome some obstacle.

Front 254

If General Electric, a U.S. based corporation, purchased a 50% interest in a company in Italy, that purchase would be an example of

Back 254

foreign direct investment.

Front 255

Imperfectly competitive firm

Back 255

A firm that has at least some control over the market price of its product.

Front 256

Implicit Collusion

Back 256

A typd of collusion in which multiple firms make the same pricing decisions even though they have not explicitly consulted with one another.

Front 257

Implicit costs

Back 257

All the firm's opportunity costs of the resources supplied by the firm's owners.

Front 258

In accounting, what is used for inventory: FIFO or LIFO?

Back 258

LIFO in the United States.

Front 259

In his study dealing with the competitive advantage of nations, Porter argued that in regard to demand conditions, a nation's firms' gain competitive advantage if their domestic consumers are __________ and __________.

Back 259

sophisticated, demanding

Front 260

Incentive

Back 260

Any reward or benefit, such as money or good feeling, that motivates choices and behaviors.

Front 261

Incentive Effect

Back 261

How much a person will change his or her hours worked in response to ta change in the wage rate.

Front 262

Income

Back 262

Payments earned by households for selling or renting their productive resources. For example, workers receive wage or salary payments in exchange for their labor.

Front 263

income velocity of money (V)

Back 263

the number of times per year a dollar is spent on final goods and services; identically equal to nominal GDP divided by the money supply

Front 264

Income-expenditure multiplier

Back 264

The effect of a one-unit increase in autonomous expenditure on short-run equilibrium output.

Front 265

Indexing

Back 265

The practice of increasing a nominal quantity each period by an amount equal to the percentage increase in a specified price index. Indexing prevents the purchasing power of the nominal quantity from being eroded by inflation.

Front 266

indirect effect of an increase in the money supply

Back 266

banks lower interest rates that they charge on loans-->encourages people to take out those loans-->businesses engage in new investment with the funds loaned-->individuals will engage in more consumption of durable goods (housing, autos, and home entertainment centers)-->generates a rise in aggregate demand--->more people involved in more spending

Front 267

Induced aggregate demand

Back 267

The portion of aggregate demand that is determined within the model.

Front 268

Induced Expenditures

Back 268

Expenditures that change a s income changes.

Front 269

Inflation dove

Back 269

Someone who is not strongly committed to achieving and maintaining low inflation.

Front 270

Inflation hawk

Back 270

Someone who is committed to achieving and maintaining low inflation, even at some short-run cost in reduced output and employment.

Front 271

Inflation shock

Back 271

A sudden change in the normal behavior of inflation, unrelated to the nation's output gap.

Front 272

Inflation Tax

Back 272

An implicit tax on the holders of cash and the holder of any obligations specified in nominal terms.

Front 273

In-kind transfer

Back 273

A payment made not in the form of cash but in the form of a good or service.

Front 274

Inside lag (of macroeconomic policy)

Back 274

The delay between the date a policy change is needed and the date it is implemented.

Front 275

Internal Debt

Back 275

Government debt owed to other fovernmental agencies or to its own citizens.

Front 276

International Business:

Back 276

private or governmental business that involves activities crossing national boundaries

Front 277

International capital flows

Back 277

Purchases or sales of real and financial assets across international borders.

Front 278

International reserves

Back 278

Foreign currency assets held by a government for the purpose of purchasing the domestic currency in the foreign exchange market.

Front 279

Intertemporal price discrimination

Back 279

Practice of separating consumers with different demand functions into different groups by charging different prices at different points in time.

Front 280

inventory investment

Back 280

changes in business inventories

Front 281

Investment

Back 281

Spending by firms on final goods and services, primarily capital goods. (also a flow concept): expenditures on new machines and buildings (capital goods) that are expected to yield a future stream of income

Front 282

investment companies

Back 282

institutions that manage portfolios of financial instruments called mutual funds on behalf of shareholders; exist largely because of cost savings from their greater scale of operations

Front 283

investment function

Back 283

represented bas an inverse relationship between the rate of interest and the value of planned real investment (as interest rates fall planned investment spending increases)

Front 284

Is goodwill a basis for the theory of Monopolistic Advantage?

Back 284

NO

Front 285

Isocost line

Back 285

Graph showing all possible combinations of labor and capital that can be purchased for a given total cost

Front 286

junk" bonds?

Back 286

Companies with less-than-investment-grade (Ba and below) ratings issue bonds. These securities, known as high-yield, or "junk," bonds, are generally too speculative for the average investor, but they can provide spectacular returns.

Front 287

Labor Productivity

Back 287

The average output per worker.

Front 288

labor-force participation rate

Back 288

the percentage of the adult population that is in the labor force

Front 289

Land Bank Program

Back 289

A program in which government supports prices by fiving farmers economic incentives to reduce supply.

Front 290

Laspeyres Index

Back 290

An index where the basket of goods is fixed.

Front 291

leakages

Back 291

the entire loan from one bank is not always desposited in another bank (two types)

Front 292

Lemons model

Back 292

George Akerlof's explanation of how asymmetric information tends to reduce the average quality of goods offered for sale.

Front 293

Lerner Index of Monopoly Power

Back 293

Measure of monopoly power calculated as excess of price over marginal cost as a fraction of price

Front 294

Life-cycle saving

Back 294

Saving to meet long-term objectives, such as retirement, college attendance, or the purchase of a home.

Front 295

liquidity approach

Back 295

a method of measuring the money supply by looking at money as a tempory store of value

Front 296

Liquidity Preference of Interest?

Back 296

It was originally Keynes' idea. The hypothesis is that people prefer to have their money be liquid, and must have a reason for it not to be liquid. So, lowering interest rates on low liquidity investment items (30 year bonds, etc...) will make them less attractive to invest in. So, when long term interest rates drop, the demand for money rises.

Front 297

liquidity ratio?

Back 297

A measure of how quickly a firm can convert its assets into cash to settle debts.

Front 298

Local standards and laws?"

Back 298

administrative instruments or trade policies

Front 299

Logrolling

Back 299

The practice whereby legislators support one another's legislative proposals.

Front 300

Long Run Competitive Equilibrium

Back 300

All firms in an industry are maximizing profit, no firm has an incentive to enter or exit, and price is such that quantity supplied equals quantity demanded.

Front 301

lump-sum tax

Back 301

a tax that does not depend on income

Front 302

M1

Back 302

Sum of currency outstanding and balances held in checking accounts.

Front 303

M2

Back 303

M1 plus savings deposits, small-demonimation time deposits, and money market mutual fund shares, along with some esoteric financial instruments.

Front 304

main determinant of saving (classical model)

Back 304

the rate of interest (the higher the rate of interest, the more peole wante to save, and therefore the less people wanted to consume)

Front 305

main determinant of saving (Keynes)

Back 305

income: Keynes argued that real saving and consumption decisions depend primarily on a household's present real disposable income

Front 306

major theories of FDI?

Back 306

1. Monopolistic Advantage theory 2. Strategic Behavior (Following competitors) 3. Horizontal FDI (FDI in the same industry abroad as at home) 4. Dunnings Eclectic theory (Location Theory)

Front 307

Managing an international business is different from managing a purely domestic business for all of the following reasons except:

Back 307

the range of problems confronted by a manager in an international business are narrower than those confronted by a manager in a domestic business

Front 308

Marginal Physical Product (MPP)

Back 308

The additional units of output that hiring an additional worker will bring about.

Front 309

Marginal Value

Back 309

Additional benefit derived from purchaisn on more unit of a good

Front 310

market definition for globalization?

Back 310

The merging of historically distinct and separate national markets into one huge global marketplace

Front 311

Market Failure

Back 311

Situation in which an unregulated competitive market is inefficient because prices fail to provide proper signals to consumers and producers

Front 312

Market screening eliminates:

Back 312

environmental forces.

Front 313

Market Seeking?"

Back 313

explore new market opportunities, to circumvent prohibitive protectionist policies and actions such as tariffs and quotas, to establish a local presence to ensure product and customer service availability, to meet buy national requirements, to become more visible locally by hiring many local staff, paying local taxes and to serve a wider range (portfolio) of markets.

Front 314

Market-Clearing Level

Back 314

The level, price, or quantity where supply and demand are equal.

Front 315

Maturation date

Back 315

The date at which the principal of a bond will be repaid.

Front 316

Means-tested

Back 316

A benefit program is means-tested if its benefit level declines as the recipient earns additional income.

Front 317

Merger

Back 317

The act of combining two firms.

Front 318

Mixed Strategy

Back 318

Strategy in which a player makes a random choice among two or more possible actiosn based on a set of chosen probabilities.

Front 319

Monetarist Theory

Back 319

A macroeconomic theory holding that the main cause of changes in the business cycle are changes in money supply.

Front 320

money market mutual funds

Back 320

funds obtained from the public that investment companies hold in common and use to acquire short-maturity credit instruments, such as certificates of deposit and securities sold by the U.S. government

Front 321

Money Multiplier

Back 321

The number that describes the change in the money supply given an initial deposit and a reserve requirement.

Front 322

Monitoring Costs

Back 322

costs incurred by the organizer of production in seeing to it that the emplooyees do what they're supposed to do.

Front 323

monopolistic advantage theory?

Back 323

based on the premise that a firm has obtained a monopolistic advantage through domestic competition that would enable it to be successful internationally.

Front 324

multi-domestic firm?

Back 324

Multi-domestic firm is one that focuses on local responsiveness! Product offerings are customized and a complete set of value creating activities are developed in each country/region, with largely autonomous decentralized organizations.

Front 325

multiplier

Back 325

the number by which a change in autonomous real investment or autonomous real consumption, for example, is multiplied to get the change in equilibrium real GDP

Front 326

multiplier formula

Back 326

=1/1-MPC or 1/MPS

Front 327

NATIONAL COMMERCIAL POLICY?

Back 327

THE INFLUENCE OF GOVERNMENT IMPOSED AND OTHER DISTORTIONS IN THE MARKETPLACE

Front 328

National Output

Back 328

The total value of goods and services produced by an economy in a specified time period. Also known as GDP.

Front 329

National Resources

Back 329

Gifts of nature” that can be used to produce goods and services; for example, oceans, air, mineral deposits, virgin forests, and actual fields of land. When investments are made to improve fields of land or other natural resources, those resources become, in part, capital resources.

Front 330

National saving

Back 330

The saving of the entire economy, equal to GDP less consumption expenditures and government purchases of goods and services, or Y âˆ' C âˆ' G.

Front 331

neoliberalism?

Back 331

Neoliberalism is widely used as a description of the revived form of economic liberalism that became increasingly important in international economic policy discussions from the 1970s onwards. In its dominant international use, neoliberalism refers to a political-economic philosophy that de-emphasizes or rejects government intervention in the domestic economy. It focuses on free-market methods, fewer restrictions on business operations, and property rights. In foreign policy, neoliberalism favors the opening of foreign markets by political means, using economic pressure, diplomacy, and/or military intervention.

Front 332

Net capital inflows

Back 332

Capital flows that are equal to foreign purchases of domestic assets (which bring funds into the country) minus domestic purchases of foreign assets (which send funds out of the country); that is, capital inflows minus capital outflows.

Front 333

Net Domestic Product (NDP)

Back 333

The sum of consumption expenditures, government expenditures, net exports, and invetment less depreciation.

Front 334

net public debt

Back 334

gross public debt minus all government interagency borrowing

Front 335

New Growth Theory

Back 335

a theory that emphasizes the role of technology rather than capital in the growth process.

Front 336

noncontrollable expenditures

Back 336

government spending that changes automatically without action by Congress

Front 337

Normal profit

Back 337

The opportunity cost of the resources supplied by the firm's owners; Normal profit = Accounting profit âˆ' Economic profit.

Front 338

Normal Rate of Profit

Back 338

Profits just high enough to compensate producers for the explicit and implicit costs (including opportunity costs) they incur in producing a particular good or service, without leading to any net entry or exit by producers in that market. Also called normal profits. Normal profits are an economic cost of production; they mark a point at which any lower level of profit would lead a producer to pursue some other use of his or her resources.

Front 339

North American Industry Classification System (NAICS)

Back 339

An industry classification that categorizes industries by type of economic activity and groups firms with like production processes.

Front 340

Official Reserves

Back 340

Government holdings of foreign currencies.

Front 341

Okun's Law

Back 341

This details the inverse relationship between unemployment and real GDP.

Front 342

oligarchy

Back 342

Govn't by the few, especially despotic power exercised by a small and privileged group for corrupt or selfish purposes. It's also a form of monopoly, but by more than one business.

Front 343

On a straight-line demand curve, elasticity decreases as the price ______ and the quantity _______ increases.

Back 343

On a straight-line demand curve, elasticity decreases as the price FALLS and the quantity demanded INCREASES.

Front 344

One cultural problem a researcher faces when doing primary research is:

Back 344

the overuse of up-to-date maps.

Front 345

operating budget

Back 345

expenditures for current operations, such as salaries and interest payments

Front 346

Opportunity benefit

Back 346

What is gained by making a particular choice

Front 347

Optimal combination of goods

Back 347

The affordable combination that yields the highest total utility.

Front 348

Optimal Comparative Advantage (Crusoe/Friday)

Back 348

"for each to be completely specialised in produc-tion, and will then trade in order to get some of the other's good"

Front 349

Out of the Labor Force

Back 349

Describes people who are not employed and are not currently looking for employment. This includes children and retirees.

Front 350

Outflows of FDI?"

Back 350

the flow of FDI out of the country

Front 351

Outside lag (of macroeconomic policy)

Back 351

The delay between the date a policy change is implemented and the date by which most of its effects on the economy have occurred.

Front 352

Paasche Index

Back 352

An index based upon a flexible basket of goods and services.

Front 353

Paper Balances

Back 353

Deposits that exist on paper but are not backed by physical currency.

Front 354

Parallel Conduct

Back 354

Form of implicit collusion in which one firm consistently follows actions of another

Front 355

Parameter

Back 355

See Constant.

Front 356

Pareto-efficient

Back 356

See Efficient.

Front 357

Participation rate

Back 357

The percentage of the working-age population in the labor force (that is, the percentage that is either employed or looking for work).

Front 358

Partnership

Back 358

A business with two or more owners.

Front 359

Passive Deficit

Back 359

The part of the deficit that exists because the economy is operating below its potential level of output.

Front 360

payment intermediaries

Back 360

institutions that facilitate transfers of funds between depositors who hold transactions deposits with those institutions

Front 361

Peak

Back 361

The beginning of a recession, the high point of economic activity prior to a downturn.

Front 362

Peak-load Pricing

Back 362

Practice of charging higher prices during peak periods when capacity constraints cause marginal costs to be high.

Front 363

People respond to ......

Back 363

People respond to incentives

Front 364

Per Capita Growth

Back 364

Producing more goods and services per person.

Front 365

Perfect hurdle

Back 365

One that completely segregates buyers whose reservation prices lie above some threshold from others whose reservation prices lie below it, imposing no cost on those who jump the hurdle.

Front 366

Perfectly discriminating monopolist

Back 366

A firm that charges each buyer exactly his or her reservation price.

Front 367

Personal Consumption Expenditure (PCE) Deflator

Back 367

A measure of prices of goods that consumers buy that allows yearly changes in the basket of goods that reflect actual consumer purchasing habits.

Front 368

Personal Responsibility Act

Back 368

The 1996 federal law that transferred responsibility for welfare programs from the federal level to the state level and placed a five-year lifetime limit on payment of afdc benefits to any given recipient.

Front 369

Phillips Curve

Back 369

Describes the general inverse relationship between unemployment and inflation.

Front 370

Planned aggregate expenditure (PAE)

Back 370

Total planned spending on final goods and services.

Front 371

Policy reaction function

Back 371

Describes how the action a policymaker takes depends on the state of the economy.

Front 372

Political Union

Back 372

"the evolution of a complete political entity cf: U.S.A. vs the European Union."

Front 373

PORTER'S DIAMOND OF NATIONAL ADVANTAGE?

Back 373

Porter's notion is that 6 sets of variables shape the environment in which firms compete: -Factor endowments -Demand conditions -Related and supporting industries -Firm's structure, strategy, and rivalry -Chance -Government Actions

Front 374

Portfolio allocation decision

Back 374

The decision about the forms in which to hold one's wealth.

Front 375

Positional arms control agreement

Back 375

An agreement in which contestants attempt to limit mutually offsetting investments in performance enhancement.

Front 376

Positional arms race

Back 376

A series of mutually offsetting investments in performance enhancement that is stimulated by a positional externality.

Front 377

Positional externality

Back 377

Occurs when an increase in one person's performance reduces the expected reward of another's in situations in which reward depends on relative performance.

Front 378

Positive analysis

Back 378

Addresses the economic consequences of a particular event or policy, not whether those consequences are desirable.

Front 379

Positive economic principle

Back 379

One that predicts how people will behave.

Front 380

potental money multiplier

Back 380

the reciprocal of the required reserve ratio, assuming no leakages into currency and no excess reserves

Front 381

precautionary demand

Back 381

holding money to meet unplanned expenditures and emergencies

Front 382

Precautionary saving

Back 382

Saving for protection against unexpected setbacks, such as the loss of a job or a medical emergency.

Front 383

Present value of a perpetual annual payment

Back 383

For an annual interest rate r, the present value (PV) of a perpetual annual payment (M) is the amount that would have to be deposited today at that interest rate to generate annual interest earnings of M: PV = M / r.

Front 384

Price leadership

Back 384

Pattern of pricing in which one firm regularly announces price changes that other firms then match

Front 385

Price level

Back 385

A measure of the overall level of prices at a particular point in time as measured by a price index such as the CPI.

Front 386

Price Rigidity

Back 386

Characteristics of oligopolistic markets by which firms are reluctant to change prices even if costs or demands change

Front 387

Price setter

Back 387

A firm with at least some latitude to set its own price.

Front 388

Price Signaling

Back 388

Form of implicit collusion in which a firm announces a price increase in the hope that other firms will follow suit

Front 389

Price Support

Back 389

Price set by government above free-market level and maintatined by governmental purchases of excess supply

Front 390

Principal amount

Back 390

The amount originally lent.

Front 391

Principal-Agent problem

Back 391

Problem arising when agents purseue their own goals frather than the goals of principals

Front 392

Principle

Back 392

The initial amount of money given as a loan.

Front 393

Private saving

Back 393

The saving of the private sector of the economy is equal to the after-tax income of the private sector minus consumption expenditures (Y âˆ' T âˆ' C); private saving can be further broken down into household saving and business saving.

Front 394

Producers

Back 394

People and firms that use resources to make goods and services.

Front 395

Product Life-Cycle Theory?"

Back 395

Raymond Vernon... Proposed that in the life-cycle of products that their production is moved from more developed to lesser developed countries in order to lower costs.

Front 396

Production

Back 396

The transformation of factors into goods and services.

Front 397

Production Function

Back 397

Y = A f (L,K,H,N) sets out the relationship between the quantity of inputs used in production and the quantity of output from production

Front 398

Productive Efficiency

Back 398

Achieving as much output as possible from a given amount of inputs or resources.

Front 399

Productivity

Back 399

Output per unit of input.

Front 400

properties of the multiplier

Back 400

the smaller the marginal propensity to save, the larger the multiplier; the larger the marginal propensity to consume, the larger the multiplier

Front 401

Public Assistance

Back 401

Means-testeed social programs targeted to the poor and providing financial, nutritional, medical, and housing assistance.

Front 402

Public Choice Analysis

Back 402

The study of decision making as it affects the organization and operation of government and other collective organizations. Involves the application of economic principles to political science topics.

Front 403

public debt

Back 403

the total value of all outstanding federal government securities

Front 404

Public Finance

Back 404

Grovernment's taxing and spending policies.

Front 405

Public saving

Back 405

The saving of the government sector is equal to net tax payments minus government purchases (T âˆ' G).

Front 406

Purchasing Power

Back 406

The amount of goods and services that a unit of currency can buy.

Front 407

Pure commons good

Back 407

One for which nonpayers cannot easily be excluded and for which each unit consumed by one person means one less unit available for others.

Front 408

Pure Strategy

Back 408

Strategy in which a player makes a specific choice or takes a specific action

Front 409

Quantity equation

Back 409

Money times velocity equals nominal GDP: M × V = P × Y.

Front 410

Quantity Theory of Money

Back 410

The theory that says that the value of money is based on the amount of money in circulation, that is, the money supply.

Front 411

Rate of Return regulation

Back 411

The maximum price allowed by a regulatory agency is based on the rate of return that a firm will earn

Front 412

Rational spending rule

Back 412

Spending should be allocated across goods so that the marginal utility per dollar is the same for each good.

Front 413

Rationing function of price

Back 413

Changes in prices that distribute scarce goods to those consumers who value them most highly.

Front 414

Real quantity

Back 414

A quantity that is measured in physical termsâ€"for example, in terms of quantities of goods and services.

Front 415

REGIONAL ECONOMIC INTEGRATION (TRADING GROUPS)?

Back 415

Groups of Countries come together in order to improve economic conditions in their countries.

Front 416

Related and supporting industries" in Porter's Theory?

Back 416

Presence of supplier and related industries

Front 417

relating income to saving and consumption

Back 417

saving = disposable income - consumption; or consumption + saving = disposable income

Front 418

relationship between the price of existing bonds and the rate of interest

Back 418

the market price of existing bonds (and all fixed-income assets) is inversely related to the rate of interest prevailing in the economy

Front 419

Relative price

Back 419

The price of a specific good or service in comparison to the prices of other goods and services.

Front 420

Rent

Back 420

The income from a factor of production that is in fixed supply.

Front 421

Reserve

Back 421

Money not given out in loans that is available for repaying depositors.

Front 422

Resource seeking?"

Back 422

to ensure that a firm can always access resources that are essential to a firm's long run survival.

Front 423

Resources

Back 423

The three (or four) basic kinds of resources used to produce goods and services: land or natural resources, human resources (including labor and entrepreneurship), and capital.

Front 424

Responding to Competitive dynamics?"

Back 424

achieving First Mover Advantages or to responding to a rival's behavior in entering a new geographic market

Front 425

retaliation?

Back 425

A tool that some Governments use to try to force other governments to play by the rules.

Front 426

Revaluation

Back 426

An increase in the official value of a currency (in a fixed-exchange-rate system).

Front 427

Reverse Engineering

Back 427

The process of a firm buying other firms' products, disassembling them, figuring out what;s special about them, and then copying them within the limits of the law.

Front 428

Rise

Back 428

See Slope.

Front 429

Robert Reich's suggestion about the global economy?

Back 429

economic national identity is becoming increasingly superfluous, increases in outsourcing is leading to the emergence of Global Products rather than defining products with a "National identity"

Front 430

Rule of 70'

Back 430

if something grows at a rate of x% a year, it will double in approximately 70/x years.

Front 431

Rule of 72

Back 431

The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.

Front 432

Run

Back 432

See Slope.

Front 433

saving function

Back 433

the complement of the consumption function

Front 434

savings deposits

Back 434

interest-earning funds that can be withdrawn at any time without payment of a penalty

Front 435

Say's Law

Back 435

A law that staes that supply creates its own demand.

Front 436

Second Degree price discrimination

Back 436

Practice of chargin diferent prices per unit for different quanitities of the same good or service

Front 437

Secure Debt

Back 437

Credit with collateral (a house or a car, e.g.) for the lender

Front 438

Sequential game

Back 438

Game in which players move in turn, responding to each other's actions and reactions

Front 439

Services

Back 439

Activities performed by people, firms, or government agencies to satisfy economic wants.

Front 440

Share Distribution of Income

Back 440

The relative division of total income amoung income groups.

Front 441

Shared consumption

Back 441

A property of a good or service such that it can be used by many without diminishing another’s ability to consume the same good; examples include street lights or radio broadcasts.

Front 442

Sherman Antitrust Act

Back 442

A U.S. law designed to regulate the competitive process.

Front 443

Shoeleather Cost of Inflation

Back 443

Costs of expected inflation caused by people having to make more trips to the bank to make withdrawals because they do not want to keep cash on hand.

Front 444

Side-effects from taxes

Back 444

Inefficiency Prevention of some mutually beneficial transactions from occurring.

Front 445

Signaling

Back 445

An action taken by an infomed party that reveals information to an uninformed party and thereby partially offsets adverse selection.

Front 446

simplifying assumptions of Keynesian model

Back 446

businesses pay no indirect taxes (ex. sales taxes); businesses distribute all of their profits to shareholders; there is no depreciations (capital consumption allowance), so gross private domestic investment = net investment; the economy is closed (there is no foreign trade)

Front 447

Sin Tax

Back 447

A tax that discourages activities society believes are harmful (sinful).

Front 448

Since the 1960s, there have been two notable trends in the demographics of the multinational enterprise. These two trends have been:

Back 448

the rise of non-U.S. multinationals and the growth of mini-multinationals

Front 449

Skill-biased technological change

Back 449

Technological change that affects the marginal products of higher-skilled workers differently from those of lower-skilled workers.

Front 450

Slope

Back 450

In a straight line, the ratio of the vertical distance the straight line travels between any two points (rise) to the corresponding horizontal distance (run).

Front 451

Social Capital

Back 451

The habitual way of doing things that guides people in how they approach production.

Front 452

Social Security System

Back 452

A social insurance program that provides financial benefits to the elderly and disabled and to their eligible dependents and/or survirors.

Front 453

Socialism

Back 453

an economic system based on individuals' goodwill toward others, not on their own self-interest, and in which, in principle, society decides what, how, and for whom to produce.

Front 454

Socially optimal quantity

Back 454

The quantity of a good that results in the maximum possible economic surplus from producing and consuming the good.

Front 455

Specific Tax

Back 455

Tax of a certain amount of money per unit sold

Front 456

Specil Interest Group

Back 456

An organization of people with a particular legislative concern. They work together to gather information, lobby politicians, and publicize their concern.

Front 457

Speculative attack

Back 457

A massive selling of domestic currency assets by financial investors.

Front 458

Stabilization policies

Back 458

Government policies that are used to affect planned aggregate expenditure, with the objective of eliminating output gaps.

Front 459

Stackelberg Model

Back 459

Oligopoly model in which one firm set its output before other firms do.

Front 460

Statistical discrimination

Back 460

The practice of making judgments about the quality of people, goods, or services based on the characteristics of the groups to which they belong.

Front 461

Stock of FDI?"

Back 461

total value of FDI at a given point in time

Front 462

store of value

Back 462

the ability to hold value over time (a function of money), also known as purchasing power

Front 463

Strategic Behavior theory?

Back 463

In the case of oligopolistic industries, the theory is that if one firm engages in FDI in another country (region), then others should follow.

Front 464

STRATEGIC(NEW) TRADE THEORY?

Back 464

Paul Krugman. many industries where the world market can only support a certain number of firms. Firms which enter the industry at the beginning, capture: first mover advantages to achieve: economies of scale and scope, benefit from learning curve effects. Firms develop a competitive advantage over any potential rivals. This creates barriers to entry for other prospective firms.

Front 465

Structural policy

Back 465

Government policies aimed at changing the underlying structure, or institutions, of the nation's economy.

Front 466

subsidies?

Back 466

Government payments to domestic producers. They take the form of cash grants, low interest loans, tax breaks, and government equity participation

Front 467

Substitution effect

Back 467

The change in the quantity demanded of a good that results because buyers switch to or from substitutes when the price of the good changes.

Front 468

Supplemental Security Income (SSI)

Back 468

A federal program that pays benefits, based on need, to the elderly, blind and disabled.

Front 469

sweep acount

Back 469

a despository institutions account that entails regular shifts of funds from transactions deposits that are subject to reserve requirements to savings deposits that are exempt from reserve requirements

Front 470

Takeover

Back 470

The purchase of one firm by a shell firm that then takes direct control of all the putchased firm's operations.

Front 471

Tax Incentive Program

Back 471

A progrma using a tax to create incentives for individuals to structure their activites in a way that is consistent with the desired ends.

Front 472

Technological Agglomeration

Back 472

The tendency of technological advances to spawn further technological advances, creating a concentration of new technologies in a specific location.

Front 473

term of most bonds?

Back 473

1 to 30 years. Under 1 year, they are usually referred to as money market instruments.

Front 474

The "Real Cost" of something is ......

Back 474

The "Real Cost" of something is what you must give up to get it.

Front 475

The _______ is a theory of foreign direct investment that combines two other perspectives into a single holistic explanation of FDI.

Back 475

eclectic paradigm promoted by John Dunning... focused on location specific advantages.

Front 476

The __________ of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year). The __________ of foreign direct investment refers to the total accumulated value of foreign-owned assets at any time.

Back 476

flow, stock

Front 477

The classical dichotomy

Back 477

holds that the `real' and `monetary' sides of the economy can be analyzed separately

Front 478

The conditions governing how companies are created, organized, and managed and he nature of domestic rivalry is referred to as

Back 478

demand conditions.

Front 479

the correct opportunity cost of holding money is

Back 479

nominal interest rate i

Front 480

The establishment of a wholly new operation in a foreign country is referred to as a(n):

Back 480

green-field investment.

Front 481

The foreign direct investment by non-U.S. firms was motivated primarily by the following two factors:

Back 481

the desire to disperse production activities to optimal locations; and the desire to build a direct presence in major foreign markets

Front 482

The main gains from subsidies accrue to __________, whose international competitiveness is increased as a result of them.

Back 482

domestic producers

Front 483

The main tasks of the Federal Reserve are:

Back 483

Supervise and regulate banks, Implement monetary policy by open market operations, setting the discount rate, and setting the reserve ratio, Maintain a strong payments system. Control the amount of currency that is made and destroyed on a day to day basis (in conjunction with the Mint and Bureau of Engraving and Printing). Other tasks include: economic research, economic education, community outreach.

Front 484

The market rewards ______

Back 484

SCARCITY

Front 485

The most common marketing research technique in developing nations is still:

Back 485

a combination of cluster analysis and multiple regression analysis.

Front 486

The most global of markets are not markets for __________, where national differences in tastes and preferences are still often important enough to act as a break on globalization.

Back 486

consumer goods

Front 487

The new trade theorists argue that the United States leads in exports of commercial jet aircraft not because it is better endowed with the factors of production required to manufacture aircraft, but because:

Back 487

one of the first movers in the industry were U.S. firms

Front 488

The quantity equation

Back 488

MV=PY, M is the amount of money in the economy, V is the velocity of money, P is the aggregate price level, Y is the real value of the goods and services traded

Front 489

The two main components of globalization are:

Back 489

the globalization of markets and the globalization of production

Front 490

The U.S. has been an attractive target for FDI for all of the following reasons except:

Back 490

the lack of competition.

Front 491

Third Degree Price Discrimination

Back 491

Practice of dividing consumers into tow or more groups with separrate demand curves and charging different prices to each group

Front 492

Third-Party-Payer Market

Back 492

A market in which the person who receives the good differs from the person paying for the good.

Front 493

three main Globalization Drivers?

Back 493

i. Declining Trade and Investment Barriers. ii. The role of technological change iii. Competition

Front 494

Three problems with the CPI

Back 494

The substitution bias, the introduction of new items, and quality changes.

Front 495

thrift institutions

Back 495

financial institutions that receive most of their funds from the savings of the public; they include savings banks, savings and loan associations, and credit unions

Front 496

time deposit

Back 496

a deposit in a financial institution that requires notice of intent to withdraw or must be left for an agreed period; withdrawal of funds prior to the end of the agreed period may result in a penalty

Front 497

Time preference?

Back 497

Time preference is the economist's assumption that a consumer will place a premium on enjoyment nearer in time over more remote enjoyment. A high time preference means a person wants to spend their money now and not save it, whereas a low time preference means a person might want to save their money as well. The time preference theory of interest is an attempt to explain interest through the demand for accelerated satisfaction. This is particularly important in microeconomics. The Austrian School sees time as the root of uncertainty within economics.

Front 498

Traditional Economy

Back 498

An economy in which customs and habits from the past are used to resolve most economic issues of production and distribution.

Front 499

Tragedy of the commons

Back 499

The tendency for a resource that has no price to be used until its marginal benefit falls to zero.

Front 500

transaction deposits

Back 500

checkable and debitable account balances in commercial banks and other types of financial institutions, such as credit unions and savings banks; any accounts in financial institutions from which you can easily transmit debit-card and check payments without many restrictions

Front 501

transactions approach

Back 501

a method of measuring the money supply by looking at money as a medium of exchange

Front 502

transactions demand

Back 502

holding money as a medium of excahnge to make payments (the level varies directly with nominal GDP)

Front 503

Transfer payments

Back 503

Payments the government makes to the public for which it receives no current goods or services in return.

Front 504

Transnational Corporation?

Back 504

is a firm that strives to be Global and Multi-domestic! ie: It must strive to achieve economies of scale whilst locally responsive.

Front 505

two primary ways tha government intervenes in international trade?

Back 505

Tarrif and Non-Tarrif Barriers

Front 506

Two types of "Absolute Advantages?"

Back 506

NATURAL ADVANTAGE (climate, resource availability, eg: abundant labor) ADVANTAGE (technology or developed skills eg: training).

Front 507

Two-part tariff

Back 507

Form of pricining in which consumers are charged both an entry and a usage fee.

Front 508

Tying

Back 508

Practice of requiring a customer to purchase on good in order to purchase another

Front 509

Unemployment spell

Back 509

A period during which an individual is continuously unemployed.

Front 510

Union Shop

Back 510

A firm in which all workers must join the union.

Front 511

Unions

Back 511

"Workers' associations that bargain with employers over wages, benefits and working conditions"

Front 512

Unit of Account

Back 512

Something that is used universally in the description of money matters such as prices. The unit of account most commonly used in the US is the dollar.

Front 513

unit of accounting

Back 513

way of placing a specific price on economic goods and services (it serves as a standard of value (yardstick) that allows people to compare the relative worth of various goods and services)

Front 514

User cost of capital

Back 514

The annual cost of owning and using a capital asset, equal to economic depreciation plus forgone interest

Front 515

Utilitarianism

Back 515

A moral theory in which the right course of action is the one that results in the highest total utility.

Front 516

Utility

Back 516

An abstract measure of the satisfaction consumers derive from consuming goods, services, and leisure activities.

Front 517

Variable profit

Back 517

Sum of prifts on each increamental unit produced by a firm

Front 518

VER's and VEA's?

Back 518

Voluntary export restraints (VER’S) and voluntary export agreements (VEA'S).

Front 519

Vertical FDI?"

Back 519

choosing to invest in economic activity upstream (Backward Vertical FDI), or Downstream (Forward Vertical FDI) from the core business activity of the business unit.

Front 520

Vertical intercept

Back 520

The value taken by the dependent variable when the independent variable equals zero.

Front 521

Vertical Merger

Back 521

A combination of two companies that are involved in different phases of producing a product.

Front 522

Vickrey Auction

Back 522

A sealed-bid auction where the highest bidder wins pays the price bid by the next-highest bidder.

Front 523

Wage

Back 523

Payments for labor services that are directly tied to time worked, or to the number of units of output produced.

Front 524

Wealth Accounts

Back 524

A balance sheet of an economy's stock of assets and liabilities.

Front 525

What accounting system did merchants of Venice in the late 1400s use?

Back 525

Double entry bookkeeping.

Front 526

What are two primary objectives of government intervention in international trade?

Back 526

1. To help domestic firms achieve first mover advantages. 2. Help domestic firms compete against firms who have first mover advantages.

Front 527

what does it mean by capital intensive?

Back 527

Is a country relying on machinery, rather than labor.

Front 528

What happens if the fed interest rate goes too high?

Back 528

Unemployment and low economic growth.

Front 529

What happens if the fed interest rate goes too low?

Back 529

Inflation.

Front 530

What important policy implications evolve from an understanding of Porter's Diamond of National Advantage?

Back 530

it is in the best interest of a firm to upgrade its advanced factors of production: eg: employee training and R & D. Equally, firms should lobby the government to urge them to increase investment in education, infrastructure, and R & D, and to promote strong competition in domestic markets.

Front 531

What is the effect of a "Protectionist policy" on the global economy?

Back 531

Protectionism is often shortsighted and fails in the long run.

Front 532

What is the largest denomination of US money ever created?

Back 532

100,000 in 1934.

Front 533

What is the life span for a US treasury note?

Back 533

Commonly used bills such as the 1,5,10, and 20 dollar bills last about 2 years. For the 2, 50 and 100, it can be over 4 years.

Front 534

What is the relationship between a nation's capital and current accounts?

Back 534

Inverse if a neutral balance of payments is to be obtained.

Front 535

What is the total cumulative value of foreign investments is referred to as?

Back 535

stock of foreign direct investments

Front 536

What makes up a nation's Balance of Payments?

Back 536

The current, capital, and reserve accounts.

Front 537

What options do corporations have for raising capital?

Back 537

Generally speaking, companies have three choices when they want to raise cash. They can issue shares of stock, they can borrow from the bank, or they can borrow from investors by issuing bonds.

Front 538

What publishes the CPI every month?

Back 538

The Bureau of Labor Statistics

Front 539

What tend to be the riskiest type of bonds?

Back 539

Corporate bonds.

Front 540

What theory did Leontief promote?

Back 540

Leontief Paradox: Leontief performed empirical tests on the "factor endowment" idea and found that it does not predict real world scenarios.

Front 541

What theory did Micheal Porter promote?

Back 541

National Competative Advantage (Porter's Diamond): Combination of the following give competative advantage in the Global Economy: 1. Factor Endowments 2. Demand Conditions 3. Relating and Supporting Industries 4. Firm Strategy, structure, and rivalry.

Front 542

What theory did Raymond Vernon promote?

Back 542

The product life-cycle theory: the idea that products are intially produced in countries with a supporting market size. Then the are filtered down to the developing world after time as costs increase in the originating country.

Front 543

What trade theory did Adam Smith promote?

Back 543

Absolute advantage: A country has an absolute advantage in the production of a product when it is more efficient than other countries.

Front 544

What trade theory did David Ricardo promote?

Back 544

Comparitive Advantage: The theory that countries can specialize in the production of goods in which they are more efficient.

Front 545

Where should firms locate their various production facilities?

Back 545

where they can be performed most efficiently

Front 546

Which of the following two statements accurately reflects the trend in foreign direct investments over the past 20 years?

Back 546

There has been a rapid increase in the total volume of FDI undertaken and there has been a change in the importance of various countries as sources for FDI

Front 547

Which of the following two theories justify some limited and selective government intervention to support the development of certain export-oriented industries?

Back 547

The new trade theory and theory of national competitive advantage

Front 548

Who is most affected by per unit taxes?

Back 548

The cost of per unit taxes is split between the buyer and the seller.

Front 549

Who is on the $10 bill?

Back 549

Alexander Hamilton.

Front 550

Who is on the $2 bill?

Back 550

Thomas Jefferson.

Front 551

Who is on the $20 bill?

Back 551

Andrew Jackson.

Front 552

Who is on the $5 bill?

Back 552

Lincoln.

Front 553

Who is on the $50 bill?

Back 553

Ulysses S. Grant .

Front 554

Why is the price elasticity of demand almost always a negative number?

Back 554

Because the law of demand says that the demand curves slope downward.

Front 555

WILLINGNESS TO BUY

Back 555

The maximum price at which he or she would buy a good

Front 556

Winner-take-all labor market

Back 556

One in which small differences in human capital translate into large differences in pay.

Front 557

WOS?

Back 557

wholly owned subsidiary

Front 558

Yield Curve

Back 558

A curve that shows the relationship between interest rates and bonds' time to maturity.

Front 559

Zero Economic Profit

Back 559

A frim is earning a normal return on its investment i.e. it is doing as well as it could by investing its money elsewhere