ch 18 Macroeconomics

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  1. Specialization without trade.
    • Conclusion:
    • When contries specialize, total world output increases, and, therefore, the potential for greater total world consuption also increases.
  2. Specialization with trade.
    Global trade allows a country to consume a combination of goods that exceed its production possibilities curve.
  3. Comparative Advantage
    The ability of a country to produce a good at a lower opportuniy cost than another country
  4. Absolute advantage
    The ability of a country to produce a good using fewer resources than another country.
  5. Free trade
    The flow of goods between countries without restrictions or special taxes.
  6. Protectionism
    The goverment's use of embargoes, tariffs, quotas, and other restrictions to protect domestic procedures from foreign competitions
  7. Embargo
    A law that bars trade with another country
  8. Tariff
    A tax on an import
  9. World Trade Organization (WTO)
    An international organization of member countries that oversees international trade agreements and rules on trade disputes.
  10. Quota
    A limit on the quantity of agood that may be imported in a giving time period.
  11. Arguments for Protection
    • Infant Industry Argument
    • National Security Argument
    • Employment Argument
    • Cheap Foreign Labor Argument
  12. Balance of payments
    A bookeeping record of all the international transactions between a country and another countries during agiven period.
  13. Balance of Trade
    The values of a nation's imports substracted from its exports. Balance of trade can be given in term of goods, services, or goods and services.
  14. Exchange rate
    The number of units of one nation's currency that equals one unti of another nation's currency.
  15. Depreciation of currency
    `A fall in the price of one currency relative to another
  16. Appreciation of currency
    A rise in the price of one currency relative to another.
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ch 18 Macroeconomics
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