Chapter 18 Flashcards
If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:
total output will be highest if Japan specializes in rice and the United States specializes in bicycles.
According to the infant industry argument, a new domestic industry needs protection because it has higher costs than established foreign competitors.
true
If the Japanese price level falls relative to the price level in the United States, then: Japanese buy less U.S. exports. the demand for dollars decreases. the supply of dollars increases. the value of the dollar falls
all of these are true
The account which records a nation’s foreign economic transactions is called the:
Balance of Payments.
When the value of our goods exports is less than the value of our goods imports,
there will be an unfavorable balance of trade.
give an example of a credit in a US current account
the Japanese buying an Apple computer
who do the rules of the WTO apply to
trade nations
what provides the base for free trade
the theory of comparative advantage
what would be expected to happen if the tariff on foreign produced automobiles were increased
the supply of foreign cars to the domestic market would decrease causing the prices to rise
what happens to trade when the value of imports is greater than exports
there will be an unfavorable balance of trade
The argument that import restrictions save jobs and promote prosperity fails to recognize that:
U.S. imports provide people in other countries with the dollars power required for the purchase of U.S. exports.
An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:
increase the price of the dollar in Indian rupees
what happens when countries specialize
total world output increases and therefore the potential for greater total world consumption also increases
what does global trade allow
it allows a country to consume a combination of goods that exceeds its production possibilities curve
what is comparative advantage
the ability of a country to produce a good at a lower opportunity cost than another country
world output and consumption are maximized when…
each country specializes in producing and trading goods fro which it has a comparative advantage . comparative advantage refers to the relative opportunity costs between countries of producing the same goods
what is absolute advantage
the ability of a country to produce a good using fewer resources than another country
define free trade
the flow of goods between countries without restrictions or special taxes
what is protectionism
the governments use of embargoes tariffs, quotas, and other restrictions to protect domestic producers from foreign competition
what is an embargo
a law that bars trade with another country
what is a tax on an import
tariff
an international organization of member countries tat oversees international trade agreements and rules on trade disputes
WTO
a limit on the quantity of a good that may be imported in a given time period
define quota
what is the balance of trade
the value of a nations imports subtracted from its exports balance of trade can be given in terms of goods, services, or goods and services
