Econ chapter 17 and 18 Flashcards
The ability to produce more of a given product using a given amount of resources.
Absolute Advantage
The ability to produce a product most efficiently given all the other products that could be produced.
Comparative Advantage
The principle that a nation is better off when it produces goods and services for which it has a comparative advantage.
Law of Comparative Advantage
Why do specializing nations need world trade?
Specialists must trade to obtain goods and services they cannot or do not produce themselves.
Why does trade benefit both countries with abundant resources and countries with few resources?
They can sell the goods and services they have an advantage in, and purchase those they don’t.
How do nations benefit from producing goods and services they have a comparative advantage in supplying?
They use the money they earn to buy goods and services they cannot produce as efficiently.
A means of preventing a foreign product or service from freely entering a nation’s territory.
Trade Barrier
Actions a nation or group taken in order to punish or put pressure on another nation.
Sanctions
A cycle of escalating trade barriers.
Trade War
The use of trade barriers to shield domestic industries from foreign competition.
Protectionism
Lowering or elimination of protective tariffs and other trade barriers between two or more nations.
Free Trade
What is the most common form of trade barrier?
Tariffs. They are much lower today than in the past.
What are three arguments some Americans have made in favor of protectionism?
Save jobs that may be hurt by foreign competition. Protect infant industries and give them the time and experience to become efficient producers. Safeguard national security by making sure U.S. Steel. energy, and advanced technological industries remain active in the event of war.
What is NAFTA?
North American Free Trade Agreement
What does NAFTA do?
Created a free Trade zone between Canada, the U.S., and Mexico.
The relationship between a country’s imports and exports.
Balance of trade
Situation in which a nation exports more goods and services than it imports.
Trade surplus
Situation in which a nation imports more goods and services than it exports.
Trade deficit
What is the different between appreciating and depreciating currency?
Appreciation means the dollar is getting stronger against other currencies. Depreciation means its getting weaker.
How do trade surpluses and deficits affect the value of its currency?
When a nation continually imports more than it exports, the value of its currency fails, if it exports more than the value of its dollar could rise to a price people wouldn’t pay.
Does the US have a trade surplus or deficit?
The United States currently runs a trade deficit.
What are some effects of our trade deficit?
Some other countries own part of our debt, the economy leads some to believe that our national security is at risk.
The increasingly tight interconnection of producers, consumers, and financial systems around the world.
Globalization
The movement of parts of a company’s operations to another country.
Offshoring
Cash payments sent by workers who have migrated to a new country to family members in their home country.
Remittances
Migration of the best educated people of less developed countries to develop nations.
“Brain Drain”
How is globalization different today than it was in the past?
It is taking place at a must faster pace
What is one positive effect of capital investment by multinational corporations in less developed countries?
Supporters say that they bring technology, jobs, and training to many remote places in the world.
