Macro Exam 2 manual review

Imports

Goods and services bought domestically but produced in other countries.

Exports

Goods and services produced domestically but sold in other countries.

Free Trade

Trade between two countries that is without government restrictions.

Tariffs

Taxes imposed by a government on imports.

Import Quotas

Numerical limits imposed on the quantity of a good imported by one country from another country.

Difference between Tariffs and Import Quotas

Tariffs are taxes on imported goods; import quotas are limits on the quantity of goods imported.

Similarities between Tariffs and Import Quotas

Both are trade barriers that protect domestic industries from foreign competition.

GDP

The market value of all final goods and services produced in a country during a period, typically one year.

GNP

The value of final goods and services produced by a country's residents, regardless of where the production occurs.

Difference between GDP and GNP

GDP measures economic performance within a country's borders, while GNP includes contributions by residents regardless of location.

Shortcomings of GDP as a Measure of Production

GDP does not account for non-market transactions and the distribution of income, potentially leading to misleading conclusions.

Benefits of International Trade

Consumers gain access to a wider variety of goods at lower prices; producers can expand markets and increase profits.

Losses from International Trade

Domestic industries may suffer due to competition, leading to job losses and wage stagnation.

Labor Force

The sum of employed and unemployed workers in the economy.

Discouraged Workers

Workers who are available for work but have given up actively seeking employment.

Labor Force Participation Rate

The percentage of the working-age population that is in the workforce.

Frictional Unemployment

Short-term unemployment arising from the process of matching workers with jobs.

Structural Unemployment

Unemployment resulting from a persistent mismatch between workers' skills and job requirements.

Cyclical Unemployment

Unemployment caused by a recession.

Full Employment

The state when cyclical unemployment is zero.

Firms Concealing Trading

Some firms may conceal their trading activities to evade taxes or because their practices may be illegal, or they want to avoid government regulations which can lead to underreporting in GDP calculations.

Impact of Homemaker Employment on GDP

When a homemaker enters the workforce, GDP rises by the amount paid for their labor, even if the overall output of goods and services does not increase, highlighting a shortcoming in how GDP measures production.

who is included in the Labor Force

only employed and unemployed workers actively seeking a job

who is not included in the labor force?

people who do not have a job and are not actively seeking employment are not in the labor force

Opportunity Cost

No country would accept terms of trade worse than its ______