unit 5 review

Question 1

Absolute advantage

Answer 1

when a particular individual or country can produce more of a specific commodity than another individual or country using the same amount of resources.

Question 2

Comparative advantage

Answer 2

a country can produce a specific good at a lower opportunity cost than another.

Question 3

Why do countries benefit from trade using comparative advantage?

Answer 3

Because it would be cheaper for them to produce more.

Question 4

trough

Answer 4

interest rates are high, unemployment high

Question 5

expansion

Answer 5

prices go up, interest rates are lower, jobs and businesses growing

Question 6

peak

Answer 6

lowest interest and unemployment rates

Question 7

GDP

Answer 7

the dollar value of all final goods and services produced within a country’s borders in one year.

Question 8

What are things included in the GDP calculation?

Answer 8

-Consumer spending
-Investments
-Government spending
-Net exports

Question 9

What are things not included in the GDP calculation?

Answer 9

-Intermediate goods
-Nonproduction transactions
-Non-market and illegal activities

Question 10

What is GDP per capita used for?

Answer 10

It identifies on average the economic output of each person.

Question 11

Globalization

Answer 11

how trade and technology have made the world a more connected and interdependent place. Bringing the world together by trade.

Question 12

Protectionism

Answer 12

the theory or practice of shielding a country’s domestic industries from foreign competition by taxing imports.

Question 13

NAFTA

Answer 13

North American Free Trade Agreement, was an agreement signed by Canada, Mexico, and the United States that created a trilateral trade block in North America.

Question 14

Effects of international trade

Answer 14

international trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive.

Question 15

Inflation

Answer 15

a general increase in prices and a decrease in purchasing power of money

Question 16

Real GDP

Answer 16

GDP measured in current prices doesn’t account for inflation from year to year.

Question 17

Strong currency

Answer 17

One unit of currency is greater than another country’s currency.

Question 18

Weak currency

Answer 18

One unit of currency is less than another country’s currency.

Question 19

Trade deficit

Answer 19

the amount by which the cost of a country’s imports exceeds the value of its exports.

Question 20

Trade surplus

Answer 20

the amount by which the value of a country’s exports exceeds the cost of its imports.

Question 21

What effects can trade surpluses have on US citizens?

Answer 21

Creating employment and economic growth, but may also lead to higher prices and interest rates within an economy

Question 22

What effects can trade deficits have on US citizens?

Answer 22

A trade deficit reduces the incomes of domestic workers, pushing many into lower income brackets.

Question 23

Frictional unemployment

Answer 23

people being in the process of moving from one job to another

Question 24

Cyclical unemployment

Answer 24

the component of overall unemployment that results directly from cycles of economic upturn and downturn

Question 25

Seasonal unemployment-

Answer 25

when people who work in seasonal jobs become unemployed when demand for labor decreases

Question 26

Structural unemployment

Answer 26

unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.

Question 27

Underemployment

Answer 27

a measure of employment and labor utilization in the economy that looks at how well the labor force is being used in terms of skills, experience, and availability to work

Question 28

Unemployment rate

Answer 28

the number of unemployed people as a percentage of the labor force (the labor force is the sum of the employed and unemployed).

Question 29

What is considered as fully employed for a Nation?

Answer 29

an economy in which the unemployment rate equals the NAIRU, no cyclical unemployment exists, and GDP is at its potential.

Question 30

Underground economy

Answer 30

the part of a country’s economic activity that is unrecorded and untaxed by its government; the black market.

Question 31

Fixed Exchange Rate

Answer 31

a regime applied by a government or central bank that ties the country’s official currency exchange rate to another country’s currency or the price of gold.

Question 32

Floating/Flexible Exchange Rate

Answer 32

a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies.