AP Macro Unit 5 Vocab

Absolute Advantage

Absolute Advantage

A situation in which a person or country can produce more of a particular product from a specific quantity of resources than some other person or country

Specialization

the use of the resources of an individual, firm, region, or nation to concentrate production on one or small number of goods and services

Devaluations

the reduction or underestimations of the worth or importance of something

Land-Intensive Goods

Products requiring relatively large amounts of land to produce

Comparative Advantage

A situation in which a person or country can produce a specific product at a lower opportunity cost than some other person or country; the basis for specialization and trade

Tariffs

A Tax imposed by a nation on an imported good

Export Subsidy

A government payment to a domestic producer to enable the firm to reduce the price of a good or service to foreign buyers

Trade Deficit

The amount by which a nation's imports exceeds its exports

Flexible Exchange Rate

A rate of exchange determined by the international demand for and supply of a nation's money; a rate free to rise or fall

Official Reserves

Foreign currencies owned by the central bank of a nation

Imports

spending by individuals, firms, and governments for goods and services produced in foreign nations

Capital-Intensive Goods

Products that require relatively large amounts of capital to produce

Terms of Trade

The rate at which units of one product can be exchanged for units of another product; the price of a good or service; the amount of one good or service that must be given up to obtain one unit of another good or service

Revenue Tariff

A tariff designed to produce income for the federal government

Dumping

The sale of a product in a foreign country at prices either below cost or below the prices commonly charged at home

Offshoring

The practive of shifting work previously done by American workers to workers located abroad.

Current Account

The section in a nation's international balance of payments that records its exports and imports of goods and service, its net investment income and its net transfers

Trade Surplus

The amount by which a nation's exports exceeds its imports

Fixed Exchange Rate

A rate of exchange that is set in some way and therefore prevented from rising or falling with changes in currency supply and demand

Currency Interventions

A government's buying and selling of its own currency of foreign currencies to alter international exchange rates

Exports

Goods and services produced in nation and sold to buyers in other nations

Labor-Intensive Goods

Products requiring relatively large amounts of labor to produce

Opportunity Cost Ratio

An equivalency showing the number of units of two products that can be produced with the same resources

Trading Possibilities Line

A line that shows the different combinations of two products that an economy is able to obtain when it specializes in the production of one product and trades it to obtain the other product

Protective Tariff

A tariff designed to shield domestic products of a good or service from the competition of foreign producers

Smoot-Hawley Tariff Act

Legislation passed in 1930 that established very high tariffs. Its objective was to reduce imports and stimulate the domestic economy, but it resulted only to retaliatory tariffs by other nations.

Trade Adjustment Assistance Act

A U.S. law passed in 2002 that provides cash assistance, education, and training benefits, health care subsidies, and wage subsidies to workers displaced by imports or relocation of U.S. plants to other countries.

Purchasing Power Parity Theory

The idea that exchange rates between nations equate the purchasing power of various currencies.