Econ Test 4

Macro

the study of a nation’s economy as a whole, focusing on the overall economy’s performance in economic growth, productivity, business cycle, unemployment, inflation, and the balance of payments and on methods for improving its performance

Globalization

the Increasing Integration of
economies,
cultures,
and institutions
across the world

TS = CS + PS

Total surplus = consumer surplus + producer surplus

US moves away from globalization evidence

liberation day, America First, implementation of tariffs, blanket tariff on all imports and high tariffs on common trading partners like China

3 main trading countries of the US

Mexico
Canada
China

Tariff

A tax the government puts on imported goods

Voluntary exports restraint

A deal where the exporting country agrees to limit how much it sells to another country

Sanction

targeted economic punishment against a country to force change in behavior

embargo

near-total ban on trade from a specific country or on a specific good

if trade brings net gains, why trade restrictions?

a) unequal distributions of gains from trade

b) national security threats

c) international politics

demystifying china’s manufacturing success

basic education, focus on science and engineering, developed supply chain & supporting infrastructure

how to respond to chinese imports

national security → small yard, high fence

impact on innovation → encourage investments

job losses → focus on services, manufacturing is cooked

Trump and Republicans Complaint

1. Chinese currency manipulation keeps the US $ stronger than it would
be, resulting in
- trade deficits
- loss of business and employment
2. China’s “unfair” misuse of intellectual property
3. Many countries “unfair” use of non-market behavior

Trump and Republicans Goals

1. Protect current jobs and business
2. Reshore employment and manufacturing
3. Reduce trade deficits
4. Enhance Economic Security

Trump and Republicans Remedies

1. International Emergency Economic Powers Act of 1977
2. Tariffs
3. Renegotiate previous trade deals
4. Reform World Trade Organization (WTO)
5. Partnerships and financial investments in US firms (e.g., Nvidia, Intel, U.S.
Steel)

Net Exports is a function of what?

exchange rate

Exchange rate is a function of what?

interest rate differential

characteristics of a currency

convertibility → how easy is it to convert to other currencies?

flexibility → what determines the price of the currency?

exchange rate systems

fixed → 1944 - 1972, currencies tied to USD which was tied to gold

float → 1973 - 1985, currencies are fully flexible, markets set exchange rates

managed float → 1986 - present, governments intervene when needed

main reserve currencies in order of LARGEST to smallest

UEJBC

US Dollar, Euro Zone euro, Japanese yen, British pound sterling, Chinese yuan renminbi