Macro Ex. 2 - final type through

imports - goods and services bought domestically but produced in other countries

exports - good and services produced domestically but sold in other countries

Who benefits from international Trade?

International trade benefits a variety of stakeholders, including consumers who gain access to a wider range of products at potentially lower prices, producers who can expand their markets and increase sales, and governments that can enhance economic growth through trade policies.

Who loses as a result of international trade?

However, some domestic industries may suffer due to increased competition from foreign markets, leading to job losses and reduced market share. Additionally, workers in sectors that cannot compete may face wage stagnation or unemployment.

Free trade - trade between countries that is without government restrictions

tariffs - taxes imposed by a government on imports

import quotas - numerical limits imposed unilaterally upon (quotas) countries on the quantity of a good imported by one country from another country

How are import quotas and tariffs different?

• Tarriffs aretypically applied as a percentage of the value of the imported goods, whereas import quotas restrict the actual volume of goods that can be brought into the country, regardless of their value.

How are import quotas and tariffs similar?

• Both import quotas and tariffs are trade barriers that governments use to protect domestic industries from foreign competition and to regulate the flow of goods across borders.

GDP - the marker value of all final goods and services produced in a country during a period, typically one year

• Gdp measures output produces WITHIN A COUNTRY’S BORDERS

• Does GDP measuresure what we want it to? - it has several shortcomings, for example:

  • household production is goods and services poeple produce for themselves, and it is not captured by GDP

  • the most important type of household production is the services a housemaker provides for their family, taking care of kids, cleaning, preparing meals

  • However, if the housemaker decides to work outside the home, enrolls kids in daycare, hires a maid, and starting eating out, the value of GDP will rise by the amount paid for these services. eve though the production of these services has not increased

  • Also, individuals and firms sometimes conceal the buying and selling of goods and services, in which case their production isn’t counted in GDP

  • There are three basic reasons why individuals and firms would conceal what they buy and see:

    • they are dealing in illegal goods and services

    • they want to avoid paying taxes on the income they earn

    • they want to avoid government regulations

GNP - the value of final goods and services produced by a country’s residents, even if the actual production of the goods and services occurs outside the borders of the country

What is the difference between GDP and GNP?

• GDP measures the total value of all final goods and services produced within a country's borders regardless of the producer's nationality, while GNP takes into account the value produced by a country's residents, including their production abroad, thereby highlighting the economic contributions of citizens and businesses regardless of location.

What are the shortcomings of GDP as a measure of total production?

• It does not account for the services prodiveded by the homemaker since they are not included in market transactions, nor does it consider the value of unpaid work, which can be significant in many economies. they also don’t consider illegal goods or services which is 10% of estimated GDP in the U.S.

Final good - good or service purchased for final use by a consumer

intermediate goods - inputs into another good or service

government purchases - include federal, state, and local government spending on goods and services, this does NOT include transfer payments, since those do not result in immediate production of new goods and services

Net exports - exports - imports

The labor force - the sum of employed and unemployed workers in the economy (only employed and unemployed people actively seeking a job are included)

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

Discouraged workers - available for work but have given up actively seeking employment because they believe no jobs are available for them (they are also excluded from the labor force)

the unemployment rate - the percentage of the labor force that is unemployed

the labor force participation rate - the percentage of the working-age population in the labor force

the working age population - equals the labor force plus the non labor force

Fricitonal unemployment - short-term unemployment that arises from the process of matching workers with jobs

Structural unemployment - unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs

cyclical unemployment - unemployment caused by a recession

If the cyclical unemployment is zero that does not mean that unemployment is zero, there will still be some fricitonal and structural employment

Full employment - when cyclical unemployment is zero

natural rate of unemployment - the normal rate of unemployment, consisting of only frictional and structural unemployment

How is someone considered to be in the labor force?

• They are employed or unemployed who are actively seeking a job

How is someone not in the labor force?

• they are unemployed and are not actively seeking a new job