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Imports
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Goods and services purchased from foreign sources
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Exports
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Goods and services sold to foreign buyers.
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Trade Balances
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Difference between exports and imports.
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Trade deficit
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Amount by which the value of imports exceeds the value of exports in a given period of time.
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Trade surplus
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Amount by which the value of exports exceeds the value of imports in a given period of time
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Opportunity costs
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Good lost because of obtaining another one.
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Comparative advantage
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ability of a country to produce a specific good at a lower opportunity cost than its trading partners.
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Absolute advantage
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ability of a country to produce a specific good with fewer resources
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Terms of Trade
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Superior to domestic opportunity costs In between respective opportunity cost in productions
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Microeconomic losers
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workers and producers who compete with imported products. They have an economic interest in restricting trade.
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Microeconomic winners
answer
workers and producers in export industries. They gain from trade (Net Gain).
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Tariffs
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tax imposed on imported goods.
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Winners
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domestic producers in import-competing industries
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Losers
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domestic consumers (higher prices), foreign producers (lose business), world efficiency (reduced trade).
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Quotas
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A limit on the quantity of a good that may be imported in a given time period. Reduces world efficiency Tend to push both domestic and import prices higher, making consumers worse off.
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Non-tariff barriers
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Barriers as product standards, licensing restrictions, restrictive procurement practices
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Exchange Rate
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refers to the value of one currency in terms to another currency.
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Currency appreciation
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An increase in the value of one currency relative to another. Exports become more expensive Imports become cheaper
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Currency depreciation
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A decrease in the value of one currency relative to another. The nation exports become cheaper The nation imports become more expensive.
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Macro performance
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GDP NGDP RGDP
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Gross Domestic Product (GDP)
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monetary value of all the output produced in a year.
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Nominal Gross Domestic Product (NGDP)
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the total value of goods produced within a nation's borders measured in current prices.
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Real Gross Domestic Product (RGDP)
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the value of output measured in constant prices.
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Labor Force
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everyone over the age of 16 who is actually working plus all those who are not working but are actively seeking employment
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Seasonal unemployment
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unemployment: seasonal variations in employment conditions
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Frictional unemployment
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unemployment associated with searching a job
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Structural unemployment
answer
unemployment associated with skills that the job requires
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Cyclical unemployment
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inadequate level of demand for goods and services and thus for labor.
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Inflation
answer
increase in the average level of prices of goods and services
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Deflation
answer
decrease in the average level of prices of goods and services.
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Inflation rate
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annual percentage increase/decrease in the average price level.
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Redistribution effects
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inflation redistributes income by altering relative prices, income and wealth.
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Price effect
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people who prefer goods and services that are increasing in price least quickly end up with a larger share of real income.
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Income effect
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people whose nominal income rise faster than the rate of inflation ends up with a larger share of total income.
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Wealth effect
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people who own assets that are increasing in real value end up better off than others.
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Uncertainty
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inflation may cause people to change their consumption, saving or investment behavior; as well as production decisions.
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Nominal Income
answer
money income received in a given period of time measured in current units.
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Real Income
answer
income in constant units, that is, adjusted for inflation.
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Aggregate supply ( All producers in the country)
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Total quantity of output producers is willing and able to supply at alternative price levels in a given period of time "ceteris paribus".
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Downward slope explanation
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1. Real balance effect: the value of money is measured by purchasing power 2.Foreign trade effect: national products become cheaper 3. Interest rate effect: at lower price levels people borrow less money interest decline.
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Upward Slope explanation
answer
1. Profit margins: costs are relatively constant in the short run, higher prices for goods and services widen the margins2.Costs: producers are spending more in resources and using the productions capacity. higher prices are required to recover higher cost that goes with an increase.
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Undesirability
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does not satisfy economic goals. (Inflation or Unemployment)
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Insatiability
answer
shifts in AD and AS curves
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Monetary Theory
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the role of money in financing aggregate demand
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Keynesian Theory
answer
lack of spending will cause the economy to contract
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Supply Side Theory
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change the supply curve to produce more or less (Technology, Taxes, subsides, laws & regulations)
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Eclectic Theory
answer
change aggregate supply and aggregate demand
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