Gains From Trade

Question 1

Developed by ________ and ________ during the 18th and 19th centuries

Answer 1

-Adam Smith and David Ricardo

Question 2

Gains From Trade

Answer 2

-The idea that both countries benefit from trade even if one country was producing all products (lower resource cost)

Question 3

Comparative Advantage

Answer 3

-Industrial/country with the lower opportunity cost for a given product has the comparative advantage in that product

Question 4

Absolute Advantage

Answer 4

-The individual or country with the lower resource cost for a given product has the absolute advantage in that product (less labor to produce the product)

Question 5

Steps to Prove Gains From Trade

Answer 5

• Figure out who has comparative advantage in each product
• Change production so that each produces more of the product in which they have the comparative advantage, and together, they produce at least as much of both products
• Propose a trade

Question 6

Static

Answer 6

-Not changing, stays the same

Question 7

Gloabalization

Answer 7

• Connecting the world, increased inequality

- Process of separate national markets integrating into one world market

Question 8

Vulnerability

Answer 8

-If you produce everything you need/consume yourself, you don’t rely on anyone else

Question 9

Price of Labor

Answer 9

-Key to distribution of income

Question 10

Within rich/poor countries, inequality _______

Answer 10

-Increases

Question 11

Gap between rich and poor countries, inequality ________

Answer 11

-Decreases

Question 12

Global Income Percentile

Answer 12

-Taken some population and ordered it from smallest to largest

Question 13

Real

Answer 13

-Adjusted to get rid of the effects of inflation

Question 14

Nominal

Answer 14

-Includes inflation

Question 15

100% increase means a ________

Answer 15

-Doubling