T3: final exam Flashcards
Scarcity
Limited amounts of goods and services are available to meet unlimited wants and needs.
Economics
The study of how people seek to satisfy their needs and wants by making choices on different levels (individuals, groups, government)
Opportunity Costs
The second option to the option that is actually chosen.
Microeconomics
The study of economic behavior and decision making in small units, such as households and firms.
Macroeconomics
The study of economic behavior and decision making in a nation’s whole economy.
Private Property
Protected by the 5th and 14th amendments. Property owned by individuals or companies and not by the government or the people as a whole.
Intellectual Property
included as private property (things created by a person, ex books, music, video).
Specialization
the concentration of productive efforts of individuals and businesses on a limited number of activities. Ex: a baker makes cakes and cookies, not cars. Leads to efficiency.
Trade Barrier
AKA Trade Restriction. A means of preventing a foreign product or service from freely entering a nation’s territory. Take several forms and can be used for various purposes.
Tariff
A type of trade barrier. A tax on imported goods. Used to be very high but are lower now. Law set by the importing country.
Import Quotas
A type of trade barrier. Place a limit on the amount of a good that can be imported. Law set by the importing country.
Voluntary Export Restraint (VER)
A voluntary limit set by the exporting country, restricting the quantity of a product it will sell to another country. Reduces the risk that the importing country will impose damaging trade barriers itself.
Licensing
A government requiring foreign countries to obtain licenses to sell goods. High licensing fees and slow licensing processes act as unofficial trade barriers.
Sanctions
Actions a nation or group of nations takes in order to punish or put pressure on another nation. Ex: in the 1960s the US banned all trade with Cuba (embargo).
Embargo
An official ban on trade or other commercial activity with a country. Ex: US to Cuba in the 1960s.
Effects of Trade Barriers
- Higher prices for foreign goods (competitive advantage to domestic firms)
- Trade wars
Trade Wars
When one country restricts imports, its trading partner may retaliate by placing its own restrictions on imports. If the first country responds with more limits, this is a trade war. Often cause economic hardship for both sides.
Beef Wars
pg 400 chart thing.
1985-EU bans import of beef treated w/ growth hormones.
1989-US imposes tariffs on tomatoes, pasta, citrus fruits, and ham
1996-WTO orders the EU to remove the beef ban
1999-EU refuses, US doubles tariffs on various things
2012-An agreement is reached
Protectionism
A reason for imposing trade barriers. This is the use of trade barriers to shield domestic industries from foreign competition. Three main arguments: -Saving jobs -Protecting infant industries -Safeguarding national security
Infant Industries
Industries in the early stages of development
Three Problems with Protective Tariffs
- lack incentive to become more efficient and competitive
- lawmakers may find it difficult to take away these protections
- prices can remain high and harm consumers
Free Trade
Opposition to protectionism. Involves the lowering or elimination of protective tariffs and other trade barriers between two or more nations.
Roots of Free Trade
Began in the 1930s after the Smoot-Hawley Act caused a decline in international trade. Reciprocal Trade Agreements Act in 1934 gave the president power to reduce tariffs and allowed congress to grant MFN status (NTR). Countries without NTR status must be taxed at a higher rate. After WW1 nations reached an agreement called the General Agreement on Tariffs and Trade (GATT).
World Trade Organization (WTO)
Founded in 1995 with the goal of making global trade more free. Works to ensure that countries comply with GATT, to negotiate new trade agreements, and to resolve trade disputes.
The European Union (EU)
Started as the Common Market, then the European Economic Community (EEC), then in 1993 that became the EU which adopted various policies to strengthen member economics. Many member nations have the same currency called the Euro.
Free Trade Zones
where a group of countries agrees to reduce or eliminate trade barriers.
NAFTA
North American Free Trade Agreement. Created a free trade zone linking the US, Canada, and Mexico. Major provisions of NAFTA:
- tariffs on all farm products and some other goods were eliminated over 15 years.
- auto tariffs were phased out or eliminated immediately
- special judges were given authority to settle trade disputes
- trucks have free access across borders of the member countries
- agreement cannot be used to override national and state environmental, health, or safety laws.
CAFTA-DR
Trade agreement between USA and five central American countries. Centra American Free Trade Agreement (DR added for the Dominican Republic)
FTAA
(Free Trade Area of the Americas). Would have opened trading among 34 nations of North and South America, but the proposal was rejected by several key nations and thus failed.
APEC
(Asia-Pacific Economic Cooperation). An economic forum including 21 countries along the Pacific ring including the US. Non-binding agreement to reduce trade barriers.
MERCOSUR
The Southern Common Market is similar to the EU in its goals. Members: Brazil, Paraguay, Uruguay, Argentina, and Venezuela.
CARICOM
(Caribbean Community and Common Market) Includes countries from South America and the Caribbean.
ASEAN
(Association of Southeast Asian Nations). Ten members and has taken steps to establish a free trade zone similar to the EU.
Debate over Free Trade
There have been many protests of free trade. Not all are opposed completely, rather they were concerned that current free trade agreements gave too much power to large multinational corporations.
Multinational
A corporation that sells goods and services throughout the world.
Biggest examples: General Electric (US), Royal Dutch Shell (Netherlands/Britain), BP (Britain), Exxon Mobil (US), Toyota (Japan), Total (France).
Opposing Views on Trade
For Trade Barriers:
- Jobs
- Industries
- Security
- Multinationals
For Trade Agreements:
- Competition
- Prices
- Efficiency
- Risk
Globalization
The increasingly tight interconnection of producers, consumers, and financial systems around the world.
Cause of Increasing Globalization
- Transportation and Communication
- Expansion of the Free Market
- Trade Agreements
Transportation and Communication
The camel, the compass, and the internet have all allowed for greater movement of products, people, and ideas around the world.
Expansion of the Free Market
Communism falling out of favor in most of the world has led to expansion of the free market.
Challenges of Globalization
- Closely linked financial markets
- economic crashes in one place spread worldwide - Multinational corporations
- do very little to aid less developed countries - Loss of jobs
- citizens losing jobs due to offshoring
Offshoring
companies moving parts of their operations to other countries
Domestic Migration
People within a country moving from rural areas to urban cities, causing overpopulated places without enough recourses to hold them: excess poverty, crime, and disease.
Remittances
People who have migrated to other countries send money back home to their families.
Brain Drain
Many well trained and educated people leave their home country for a higher paying job in a more developed nation. May hurt a countries development.
Group of 20
19 countries plus the EU. Works to give emerging economies a greater voice. Includes finance ministers and central bank governors from growing nations. Promotes growth and combats financing terrorism.
Sustainable Development
the goal of meeting current developmental needs without using up the resources needed by future generations
Deforestation
large scale destruction of forests
