Test 9 Flashcards
Exports
Goods or services that are sold to a buyer in another country
Balance of Trade
A comparison of the nations imports and exports
Trade Surplus
When your exports exceed your imports
Trade Deficit
When your imports exceed your exports
Absolute Advantage
A situation where a country can produce more of a good than another country can produce with the same quantity of resources
Comparative Advantage
A situation where a country can produce a good at lower opportunity cost than another country
Barriers to Trade
- Tariff
- Quotas
- Export Subsidy
Tariff
Tax on imported goods
Types of Tariffs
- Revenue Tariff
2. Protective Tariff
Revenue Tariff Purpose
To raise money for the government
Protective Tariff Purpose
To protect domestic industry from foreign competition
Quotas
A restriction on the number of goods that can enter the country from abroad
Export Subsidy
A payment by a country to its exporters that enables them to sell their products to other countries at a lower price that they can sell them for at home
Why do nations restrict international trade?
- To protect industries that are essential to national defense
- To protect infant industries
- To diversify the economy
- Protection form cheap foreign labor
- To stimulate economic growth
- It can be used as retaliation against other countries
Free Trade
The absence of any form of government interference in international trade
Free Trade Assosiation
An agreement between countries to remove the barriers of trade
Customs Union
Promotes Free Trade among its members, but imposes a common tariff on non-member countries
Imports
A good or service that is purchased from a seller in another country
Major Agriculture Programs
- Set Aside Program
- Acreage Allotments
- Government Disposal of Surplus Crops
Set Aside Program
Pays farmers to take land out of production to decrease supply and prevent overproduction
Acreage Allotments
Allocates an acreage base to a farm involuntarily
Government disposes of surplus crops
The Government buys surplus crops and then destroys it
Determinants of Equilibrium of Wages
- Compensation Differentials
- Human Capital
- Ability, Effort, and Chance
- Signaling
Compensating Differentials
Difference in wages that arise from non-monetary characteristics of different jobs
Human Capital
The accumulation of investments in people
Ability, Effort, and Chance
More attractive people will about 5% more in their lifetime than people with average people
Average looking people will make 5-10% more in their lifetime than below average looking people
Signaling
An action taken by an informed party to reveal private information to an uninformed party
Signaling Example
A person with a college degree signals to the employer that he is more dedicated than the other candidate
Discrimination
The offering of different opportunities to similar individuals who differ only by race, ethnic group, gender, age, or other personal characteristics
Poverty Rate
The percentage of the population who’s family income falls below an absolute level called the Poverty Line
Poverty Line
An absolute level of income set by the federal government, for each family size, below which a family is deemed to be in poverty
Government Programs to Help Poverty
- Food stamps
- Housing vouchers
- Obamacare/Medicaid
Life Cycle
The regular pattern of income variation over a person’s life
What Age Does the Average Americans Income Peak?
50
How many people are below the Poverty Line?
In a typical 10 year period, 1 out of 4 families will fall below the poverty line for at least one year
How many millionaires are first generation? (first in their family)
4 out of 5
Utilitarianism
The political philosophy according to which the government should choose policies to maximize to total utility of everyone in society
Who started Utilitarianism
Jeremy Bentham and John Stuart Mill
What is the goal of Utilitarianism
apply the logic of individual decision-making to generations concerning…
Utility
The level of happiness or satisfaction that a person receives from his or her circumstances
Liberalism
- Society’s institutions, laws, and policies must be just
2. Can we objectively determine what a just society should be?
What novel is under Liberalism?
John Rawls A Theory of Justice
Libertarianism
The political philosophy according to which the
government should punish crimes and enforce voluntary agreements but not redistribute income
Libertarianism says…
- Society itself doesn’t have income
- Only individuals earn income
- Government shouldn’t take from individuals to give to others
- Equality of opportunity is more important that equality of incomes
Policies to reduce poverty
- Minimum-wage laws
- Welfare
- Income tax
- Transfer payments
