Chapter 4 Flashcards
(20 cards)
Trade
occurs when goods, services, or resources are exchanged
Barter
Trade without money
comparative advantage
producing a good if he or she has a lower opportunity cost of producing the good, in terms of other goods sacrificed
Transactions costs
arise due to the sacrifice that must be made to search out, negotiate, and complete an exchange
balance of trade
the dollar value of exported goods and services minus the dollar value of imported goods and services
trade surplus
A positive balance of trade
trade deficit
negative balance of trade
the current account
the monetary value of the flow of goods and services
the capital account
the stocks and bonds of US companies and/or governments
balance of payments
the sum of the current account and the capital account, is always zero
exchange rate
The price of one country’s currency in terms of another country’s currency
dollar has appreciated
gained in value, compared to the peso.
protectionists
Modern day mercantilists
Tariffs
taxes on imports, sometimes more than 100% of the import’s price.
• Quotas
restrictions on the quantity of imports that citizens can purchase.
• Subsidies
paying domestic firms to produce. Unless foreign governments retaliate, foreign industries can’t compete
• Export subsidies
paying domestic firms for each unit they export
• Domestic content restrictions
laws that say a product made in the country must be primarily made using resources from the country.
• Anti-competitive manufacturing specifications
requiring that a particular imported product be manufactured with inputs that are difficult to acquire except in the importing country.
the economic problem
allocating society’s scarce resources to their best uses.
