Chapter 3 flashcards

Interdependence

Everyday, you rely on people around the world, most of whom you've never met, to provide you with the goods and services you enjoy.

Imports

Goods produced abroad and sold domestically.

Exports

Goods produced domestically and sold abroad.

Absolute Advantage

The ability to produce a good using fewer inputs than another producer.

Comparative Advantage

The ability to produce a good at a lower opportunity cost than another producer.

Principle of Comparative Advantage

Each good should be produced by the individual who has the smaller opportunity cost of producing that good.

Short Term

The period in which we make decisions that reflect our immediate or short-term wants, needs, or limitations.

Long Term

The period in which we make decisions that affect our needs, wants, and limitations over a long-term horizon.

Consumer Goods

Goods produced for current consumption, such as food.

Capital Goods

Goods that help produce other valuable goods, such as factories.

Investment (General)

Can be towards capital goods or human capital (e.g., college, acquiring Oskills).