Macroeconomics chapter one Flashcards
Think of the last time you bought or sold something. Why did you make the trade?
You probably traded because you preferred what you got over what you gave up.
What are the 3 benefits of trade
1.) trade makes people better off when preference differ
2.) trade increase productivity through specialization and the division knowledge
3.) Trade increases productivity through comparative advantage
What does trade create
value
trade moves goods from people who value them ______ to people who value them _____
less; more
does trade make people with different preferences worse or better off
better off
without trade there would be no what?
specialization
People will specialize in the production of a single good only when what?
only when they can trade for other goods
What 2 things does specialization do in relation to trade?
Increased productivity and division of knowledge
increased productivity in relation to trade
we can produce more through trade than by induvial production.
what advantages to people who specialize have in trade
they have more knowledge about their field.
Because they sell large quantities, people who specialize can take advantage of large-scale equipment.
division of knowledge
without specialization, each person produces their own food, clothing, and so on.
with specialization, much more knowledge is used than what?
than what could exist in a single brain
knowledge increases productivity therefore specialization increases total what?
total output
every increase in world trade is an opportunity to increase what?
the division of knowledge
One of the benefits of specialization is:
a.) less pollution
b.) more equality.
c.) increased productivity
c.) increased productivity