Chapter 4 Flashcards
Trade
When goods, services or resources are exchanged
Barter
Trade without money
Incentives to Trade
- People differ in tastes
- People differ in abilities
- More highly populated markets give rise to better use of resources through specialization
Comparative Advantage
Having a lower opportunity cost of producing a good, in terms of other goods sacrificed
Transactions Costs
Sacrifices made in order to search out, negotiate, and complete an exchange
Balance of Trade (as pertaining to mercantilists)
the dollar value of exported good - the dollar value of imported goods
Trade Surplus
Positive Balance of trade
Trade Deficit
Negative Balance of Trade
The Current Account
The monetary value of the flow of GOODS and SERVICES
The Capital Account
The monetary value of the flow of STOCKS and BONDS
Exchange Rate
The price of one country’s currency in terms of another country’s currenct
Modern Day Mercantilists are known as…..
Protectionists
Tariff
Tax on imports
Quota
Restrictions on quantities of imports people can buy
Subsidies
Government paying domestic firms to produce
Export Subsidies
Government paying domestic firms to export
Domestic Content Restriction
Laws that say a product made in the country must be made with resources from the country
Anti-Competitive Manufacturing Specifications
Requiring that a particular imported product be manufactured with inputs that are difficult to acquire except in the importing country
Division of labor is limited by
the market
Internal Cost
What is given up in production in terms of another good
External Cost
Given up in trade
