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Flashcards in Chapter 4 Deck (19):
1

Trade

Occurs when goods, services, or resources are exchanged, sometimes using money as a medium of exchange

2

Barter

Trade without use of money

3

Incentives to Trade

People differ in taste
People differ in abilities
More highly populated markets give rise to better use of resources through specialization

4

Comparative Advantage

An individual has an advantage at producing a good if he/she has a lower opportunity cost of producing the good, in terms of other goods sacrificed

5

Transactions Costs

These costs arise due to the sacrifice that must be made to search out, negotiate, and complete an exchange

6

Balance of Payments

The dollar value of exported goods and services minus the dollar value of imported goods and services

7

Trade Surplus

Positive balance of payments

8

Trade Deficit

Negative balance of payments

9

Flow of Money/Flow of Goods

Every flow of money there is also a matching flow of goods

10

The Current Account

Measures the monetary value of the flow of goods and services

11

The Capital Account

US balances in accounts and companies that the governments helps

12

Exchange Rate

The price of one country's currency in terms of another country's currency

13

Tariffs

Taxes on imports, sometimes more than 100% of the import's price

14

Quotas

Restrictions on the quantity of the imports that citizens can purchase

15

Subsidies

Paying domestic firms to produce. Unless foreign governments retaliate, foreign industries can't compete

16

Export Subsidies

Paying domestic firms for each unit they export

17

Domestic Content Restrictions

Laws that say a product made in the country must be primarily made using resources from the country

18

Anti-competitive Manufacturing Specifications

Requiring that a particular imported product be manufactured with inputs that are difficult to acquire except in the importing country

19

The Economic Problem

Allocating society's scarce resources to their best uses