Economics:Competency 4

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Economics:Competency 4
2011-01-21 12:18:46

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  1. why do people/countries/buisnesses trade?
    because they believe they will benefit from the trade
  2. comparative advantage
    in order to maximize trade, each country specializes in goods it produces most cheaply, (example China in electronics, US in furniture?)
  3. What are the largest categories of US exports?
    services and capital goods
  4. What is the largest category for US imports?
    industrial supplies and materials i.e. oil
  5. What is a trade surplus?
    value of exports exceeds value of imports in a given period of time
  6. What is a trade deficit?
    value of imports exceeds value of exports in a given period of time
  7. The value of US imports and exports has steadily ________ (increased/decreased) over time.
  8. The US faces a trade ________ (surplus/deficit)
  9. Trade Restrictions
    actions by gov't to limit trade
  10. Tariff
    tax on imports. Increases price of imports to put foreign producers at disadvantage.
  11. Quota
    limit gov't puts on amount of product that may be imported.
  12. Quotas target imports from ____________ __________.
    particular countries
  13. What are two problems with trade restrictions?
    • trade war
    • slowing of introduction of new goods
  14. Overall the trend has been toward _______ (lower/higher) tariffs
  15. free trade
    international trade with no restrictions made by gov'ts
  16. free trade leads to ____________ (decreased/ increased) competition among buisnesses.
  17. What do buisnesses have to do to compete when there is free trade?
    • 1) increase productivity
    • 2) pay workers less
  18. How can free trade be achieved?
    gov'ts can join other countries to create common markets or sign mutilateral agreements
  19. What are fixed exchanged rate systems?
    exchange rates fixed by gov'ts
  20. What are flexible exchange rate systems?
    exchange rate determined by supply and demand
  21. Are fixed or flexible exchange rates more common today?
  22. What are three reasons US citizens might need foreign currency?
    • 1) to buy foreign goods
    • 2) to invest in another country (stock market)
    • 3) to buy and sell (speculate) foreign exchange to make a profit
  23. appreciation
    demand for american products increases, demand for USD increases, so value of USD increases
  24. depreciation
    demand for american products decreases, demand for USD decreases, so value of USD decreases