econ u7 test review

Trade

The exchange of goods and services between individuals, businesses, and governments due to scarcity and the desire for items not easily obtainable.

Specialization

Focusing on producing specific goods or services in which a country has a comparative advantage to save resources and increase efficiency.

Absolute Advantage

When one producer can produce a product more efficiently than another using the same resources.

Comparative Advantage

When one country can produce a good at a lower opportunity cost compared to another producer.

Import

Goods bought from another country.

Export

Goods sold to another country.

Trade Agreement

A treaty between countries to facilitate trade by reducing tariffs and trade restrictions.

Trade Deficit

When a country imports more than it exports, leading to a negative balance of trade.

Balance of Trade

The difference between a nation's imports and exports, indicating a trade surplus or deficit.

Trade Barrier

Measures to restrict foreign products or services from entering a country's territory.

Tariff

Tax imposed on imported goods to increase their price and protect domestic producers.

Quota

Limit on the quantity of goods that can be imported.

Standards

Regulations products must meet to enter a country, ensuring safety and compliance with local laws.

Embargo

Prohibition of trading with another country, either broadly or specifically.

Subsidies

Payments by the government to local manufacturers to reduce production costs and promote competitiveness.

Protectionism

Using trade barriers to shield domestic industries from foreign competition.

Free Trade

Advocating for unrestricted trade between countries to promote economic growth and efficiency.

Depreciation

When a currency loses value relative to another currency, making it weaker and able to buy less of another currency.

Exchange Rates

They influence the price of imports, exports, tourism, firm profits, unemployment, inflation, economic growth, and the balance of payments.

Strong vs

A strong U.S. dollar benefits Americans for foreign purchases and travel but harms U.S. exports, while a weak dollar benefits foreign purchases of American goods and travel to the U.S. but harms U.S. residents' import demand.

Flexible Exchange Rate System

Establishes currency value through supply and demand forces, unlike fixed exchange rates.

Euro

The currency established by the European Union.

British Pound Exchange Rate

Approximately $2.06 needed to purchase one British pound.

Mexican Peso Exchange Rate

Around $21.42 needed to purchase two U.S. dollars.

Swiss Franc Exchange Rate

0.86 Swiss francs needed to purchase one U.S. dollar.

Market System

Economic system best at providing incentives to produce, driven by the profit motive.

Devaluing the Dollar

Solution to fix a U.S. trade deficit by making U.S. products more expensive, reducing imports, and increasing exports.