Assessing Global Economic Performance And International Trade Flashcards
(22 cards)
What is Consumer Surplus?
The difference between the amount a buyer is willing to pay for a good, and the amount the buyer actually pays for it, summed over the quantity consumed.
What is GDP?
The market value of all final goods and services produced within a country’s borders in a given time period.
What does ‘final goods and services’ mean in GDP?
Goods that are consumed by the end user, not used as inputs—avoids double counting.
Are used cars and stock purchases included in GDP?
No. Only current production counts. Used goods and financial assets are excluded.
How do we calculate GDP using the expenditure approach?
GDP = C + I + G + (X - M)
What are the 4 categories in the expenditure approach?
Consumption, Investment, Government Purchases, Net Exports.
What is Nominal GDP?
GDP measured using current prices (no inflation adjustment).
What does the GDP Deflator do?
It shows how much of the change in Nominal GDP is due to inflation.
What is Consumer Surplus?
The difference between what buyers are willing to pay and what they actually pay.
Example of Consumer Surplus?
You’re willing to pay $20 for Chipotle, but it costs $10 → $10 is your consumer surplus.
What is Producer Surplus?
The difference between what sellers are paid and the minimum amount they’d accept.
Example of Producer Surplus?
You were willing to sell a game console for $350, but someone pays $500 → $150 surplus.
What happens to consumer surplus if a tariff is imposed?
It decreases—prices go up for consumers.
What is deadweight loss from a restriction like a tariff?
The value of trades that don’t happen because of the price distortion—lost surplus.
Who benefits from free trade when world price is lower than domestic price?
Consumers benefit; domestic producers lose.
Who benefits when world price is higher than domestic price?
Producers benefit; consumers lose.
What does a tariff do?
Raises prices, reduces imports, helps domestic producers, hurts consumers, and creates deadweight loss.
What does a quota do?
Limits quantity of imports, similar effects to tariffs, but foreign sellers may profit instead of the government.
What is a subsidy?
A payment from the government to domestic producers to reduce their costs.
What is the World Price?
The international price of a good, used to determine trade flow.
If World Price < Domestic Price, will the country import or export?
Import (because it’s cheaper abroad).
If World Price > Domestic Price, will the country import or export?
Export (because it sells for more abroad).
