The total number of goods and services produced in a given year + any foreign income - any interest or debt payments
Gross National Income
The total goods and services produced in a given year
Gross Domestic Product
What are the issues of measuring GDP and GNP?
1. They fail to distinguish ampong types of economic activity
2. Many goods and services generate costs that are not reflected in their prices
3. Many nuturing and creative activities are not included because they are not bought and sold
the estimated number of dollars required to purchase comparitable goods in different countries
Purchasing Power Parity
Explain the GINI index.
A society that scores 0.0 on the Gini scale has perfect equality in income distribution. Higher the number over 0 higher the inequality, and the score of 1.0 (or 100) indicates total inequality where only one person corners all the income.
Explain the difference between the market and the coordinated economy.
Government holds stronger ownership of vital industries in coordinated market which keeps it more stable.
What are some characteristics of American public policy?
High educational spending
Low support for working families
Private, rather than public, services
Tax breaks, not income support
What are the three factors of production? and what is defined as "capital?
Capital (anything that aids in the production of labor)
What does comparitive advantage tell us?
Every country has a comparitive advantage in something
Every country can gain by specializing in what it does competitively well and trade for what it does less well
What does the Stolper-Samnelson Theorem tell us?
In an economy open to trade: The price of a country's abundant factor will rise
The price of a country's scarce factor will fall
What do trade policy preferences say about winners and losers of trade?
Losers from trade want less trade and higher tariffs
Winners from trade want more trade and lower tariffs
How does European quality merchandise compare to that of American-made merchandise?
better fine-tuning high quality
better at niche products
compete on quality, not price
How do Americans compare to Europeans as far as manufacturing products?
better at rapid innovation
better at mass production
compete on price, not quality
How does America distinct itself from taxation, social spending, and inequality of income among its citizens?
we tax less than Europe
we spend less on education and socially
inequality is higher
Which countries have a comparitive advantage in capital and human labor?
Advanced Industrialized countries
Which countries have a comparitive advantage in mature capital?
Asian Newly Industrialized nations
How are tariffs and countries related?
losers from trade want less trade and higher tareffs
winners from trade want more trade and lower traiffs
What are the four basic principles of the GATT/WTO?
reciprocity and progressive tariff reductions
What are the consequences of no investment?
no expansion of employment
no productivity gains
no economic growth
What are the two strategies for structural transformation?
invest in productive activities
What does ISI stand for?
Import Substitution Industrialization
What does EOI stand for?
Export Oriented Industralization
What is mercantilism?
The exporting of goods only, no imports, in order to maximize wealth