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Econ Packet 5
Terms in this set (71)
transactions by people who do not follow federal and state laws with respect to reporting earnings
combination of inflation and stagnation (low economic activity)
attempts by the federal government to keep the economy healthy, includes monetary and fiscal policies
percentage of civilians of the civilian labor force that are out of work, unemployed but is actively seeking work
condition of the economy when the unemployment rate is lower than certain percentage establish by economists studies
theory that prices rise as the result of excessive business and consumer demands, demand increase faster than total supply resulting in shortages that lead to higher prices
theory that higher wages push up prices
What are four types of unemployment?
cyclical, structural, seasonal, and frictional
federal governments use of taxation and spending policies to affect overall business activity
circular flow of income and output
economic model that pictures income as a flowing continuously between businesses an consumers
What are leakages out of the circular flow of income and output
the leakages refer to when people deposit their income into a saving account and government taxation
theory of the relationship between the amount of money the Fed places in circulation and the level of activity in the economy
supported of the theory of monetarism, often associated with Milton Friedman
monetarists belief that the Fed should allow the money supply to grow at a smooth consistent rate per year and not use monetary policy to simulate or slow the economy
a possible central bank policy in which the head of the central bank is given a specified annual rate of inflation as a goal
period of time between the time fiscal policy is enacted and the time it becomes effective
Who is the economist that is most often linked to monetarism?
goods brought from other countries fro domestic use
goods sold to countries
ability of one country to produce more output per unit than can another country
concept that a nation should produce and export a limited assortment of goods which it is particularly suited in order to use its resources efficiently
ability of a country to produce a product at a lower opportunity cost than another country
What does the US gain from international trade?
The US wants to obtain imports. We gain as a country from international trade is the ability to import the things we want
the price of one nations current in terms of another nations currency
foreign exchange markets
markets dealing in buying and selling foreign currency for businesses that want to import goods from tother country
fixed rate of exchange
system under which a national government sets the value of its currency in relations to other countries
international monetary fund (IMF)
agency whose members governments once were obligated to keep their foreign exchange rates more or less fixed, today it offers monetary advice and provides loans to developing nations
lowering a currency value in relation to other currencies by government order
flexible exchange rate
arraignment in which the forces of supply and demand are allowed to set the price of various currency
fall in the price of a currency through the action of supply and demand
balance of trade
difference between the value of a nations exports and its imports
Why do nations need a system of currency exchange?
To engage in world trade, people must have a way of knowing what the price of their currrancy is in terms of national currency, and be able to exchange one type of currency for another
IN what way does depreciation of a country currency improve that counts competitiveness in foreign trade?
political or economic instability with in a country may encourage people to exchange their currency for a more stable currency
What are foreign exchange markets necessary?
a foreign exchange markets allows for easy and quick conversion from one system of currency to another
tax placed on imported product
tax on imports used primarily to raise government revenue without retracting imports
restriction imposed on the number of units of a particular good that can be brought into the country
complete restriction on the import or export of a particular good or goods going to or coming from a specific country
people who argue for trade restrictions to protect domestic industries
world trade organization
worlds largest trade agreement, currently with more than 150 member nations
North American Free Trade Agreement (NAFTA)
trade agreement deigned to reduce and gradugally eliminate barriers between Mexico, Canada, and he United States
Central American free Trade Agreement (CAFTA)
trade agreement designed to reduce tariff barriers between Costa Rice, El Salvador, Guatemala, Honduras, Nicaragua, the dominican republic, and the US
European Union (EU)
organization of European nations whose goal is to encourage economic integration as a single market
How can a nation restrict imports?
Tariffs, Quotas, and embargo
What is the difference between a revenue tariff and a protective tariff?
Revenue tariff : raise government revenue without restricting imports significantly Protective tariffs: raise the cost of imported goods to protect domestic producers
nations with relatively high standards of living and economic based more on industry than agriculture
nations with little industrial development and relatively low standard of living
growing of just enough food by a family to take care of its own needs, no crops are available for export or to feed an industrial workforce
infant mortality rate
death rate of infants who die during the first year of life
What are five characteristics of developing nations?
poor health conditions
low literacy are
rapid population growth
taking over industries by governments without paying for them
funds, goods, and services given by governments and private organizations to help other nations and their citizens
loans and outright grants of funds or equipment to other nations
aid in the form of engineers, teacher, and technicians to teach skills to individualist other countries
aid govern to a nation armed forces
Why are foreign investors so attracted to developing nations?
low wages, few regulations, and abundant raw material
offices and agencies of the government that each deal with a specific ares
the legal or illegal export of currency or money capital from a nation by that nations leader
What are four obstacles of growth?
1. attitudes and beliefs
2. continues rapid population growth
3. trade restrictions
4. misses of resources
centralized planning system that used to be the basis for china's economic system, eventually was transformed to a regional planning system leading to limited free enterprise
Why is the notion of private property rights difficulty to accept in a communist society?
It is slow to be accepted because communist dogma has for decades criticized private property as detrimental for the state
interdependence among the countries of the world, especially with financial markets and telecommunications
long distance communication usually electronic using communication satellites and fiber optic cables
What kinds of financial investments are traded in global markets?
government securities, foreign exchange, and shares of stocks
direct foreign investment (DFI)
the purchase by foreigners of real estate and businesses in another country
Why do foreigners purchase US government securities?
They think the rate of return is higher than they can get elsewhere
firms that do have offices or factories in many countries
branches of firms
What is an example of cross-border investment?
European Union connect more direct foreign trade investments in Western Europe that anywhere else
How can multinationals help developing countries?
many foreign governments want multinationals to enter their markets through joint ventures with local firms in hope that local firms will capture some of the profit
How many multinationals exist in the world today?
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