ECON Chap 16 Flashcards
What is a country’s primary motivation to specialize in the production of particular goods and then trade for other desired goods?
Specialization increases total output.
What is identical to a country’s production possibilities, in the absence of trade?
Its consumption possibilities
How can a nation expand its consumption possibilities?
Through trade
How can the world economy achieve maximum gains from trade and higher level of material well-being?
With free trade based on comparative advantage
What do the terms of trade depend on?
The willingness of market participants to buy or sell at various prices
What is the idea that there is a net from trade?
It is that trade benefits some people but hurts others
In the absence of trade, what is the equilibrium determined by?
The interaction between supply and demand
Why is arguing for a tariff popular during a recession?
Because tariffs will raise prices, making some import-competing industries profitable
What are the results of non-trade equilibrium and vice versa
Increased prices and decreased consumption and vice versa
What are a greater threat to competition than tariffs?
Import quotas
What shape is the demand curve for dollars?
It is downward sloping
In the market for dollars, what do the market activities that influence the supply of dollars include?
American investments in foreign countries and their demand for imports
What are the main goals of the General Agreement on Tariffs and Trade?
The pursuit of free-trade policies and an extension of equal access to markets
What is the purpose of the World Trade Organization?
To assist importers and exporters in conducting their trade
