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54 Cards in this Set
- Front
- Back
Stabilization Properties
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attempts by the federal govt to keep the economy healthy; includes monetary and fiscal policies
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Unemployment Rate
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percentage of the civilian labor force that is unemployed but is actively looking for work
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Full Employment
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condition of the economy when the unemployment rate is lower than a certain percentage established by economists' studies
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Underground Economy
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transactions by people who do not follow federal and state laws with respect to reporting earnings
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Demand-Pull Inflation
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theory that prices rise as the result of excessive business and consumer demand; demand increases faster than total supply, resulting in shortages that lead to higher prices
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Stagflation
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combination of inflation and stagnation (low economic activity)
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Cost-Push Inflation
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theory that higher wages push up prices
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Fiscal Policy
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federal government's use of taxation and spending policies to affect overall business activity
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Circular Flow of Income and Output
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economic model that pictures income as flowing continuously between businesses and consumers
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Monetarism
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theory that deals with the relationship between the amount of money the Fed places in circulation and the level of activity in the economy
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Monetarists
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supporters of the theory of monetarism, often associated with Milton Friedman
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Monetary Rule
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Monetarists' belief that the Fed should allow the money supply to grow at a smooth, consistent rate per year and not use monetary policy to stimulate or slow the economy
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Inflation Targeting
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a possible central bank policy in which the head of the central bank is given a specified annual rate of inflation as a goal
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Time Lags
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periods between the time fiscal policy is enacted and the time it becomes effective
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Imports
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goods bought from other countries for domestic use
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Exports
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goods sold to other countries
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Absolute Advantage
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ability of one country to produce more output per unit of input than can another country
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Specialization
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concept that a nation should produce and export a limited assortment of goods for which it is particularly suited in order to use its resources most efficiently
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Comparative Advantage
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ability of a country to produce a product at a lower opportunity cost than another country
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Exchange Rate
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the price of one nation's currency in terms of another nation's currency
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Foreign Exchange Markets
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markets dealing in buying and selling foreign currency for businesses that want to import goods from other countries
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Fixed Rate of Exchange
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system under which a national government sets the value of its currency in relation to other currencies
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International Monetary Fund (IMF)
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agency whose member governments once were obligated to keep their foreign exchange rates more or less fixed; today it offers monetary advice and provides loans to developing nations
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Devaluation
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lowering a currency's value in relation to other currencies by government order
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Flexible Exchange Rates
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arrangement in which the forces of supply and demand are allowed to set the price of various currencies
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Depreciation
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fall in the price of a currency through the action of supply and demand
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Balance of Trade
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difference between the value of a nation's exports and its imports
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Tariff
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tax placed on an imported product
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Revenue Tariff
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tax on imports used primarily to raise government revenue without restricting imports
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Protective Tariff
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tax on imports used to raise the cost of imported goods and thereby protected domestic producers
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Import Quota
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restriction imposed on the number of units of a particular good that can be brought into the country
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Embargo
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complete restriction on the import or export of a particular good or goods going to or coming from a specific country
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Protectionists
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people who argue for trade restrictions to protect domestic industries
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World Trade Organization (WTO)
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world's largest trade agreement, currently with more than 140 members
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North American Free Trade Agreement (NAFTA)
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trade agreement designed to reduce and gradually eliminate tariff barriers between Mexico, Canada, and the US
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Central American Free Trade Agreement (CAFTA)
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trade agreement designed to reduce tariff barriers between Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic and the US
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European Union (EU)
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organization of European nations whose goal is to encourage economic integration as a single market
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Developed Nations
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Nations with relatively high standards of living and economies based more on industry than o agriculture
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Developing Nations
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Nations with little industrial development and relatively low standards of living
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Subsistence Agriculture
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growing of just enough food by a family to take care of its own needs; no crops are available for export or to feed an industrial workforce
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Infant Mortality Rate
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death rate of infants who die during the first year of life
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Confiscation
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taking over industries by government without paying for them
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Foreign Aid
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funds, goods, and services given by governments and private organizations to help other nations and their citizens
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Economic Assistance
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loans and outright grants of funds or equipment to other nations
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Technical Assistance
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aid in the form of engineers, teachers, and technicians to teach skills to individuals in other nations
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Military Assistance
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aid given to a nation's armed forces
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Bureaucracies
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offices and agencies of the government that each deal with a specific area
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Capital Flight
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the legal or illegal export of currency or money capital from a nation by that nation's leaders
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Five-Year Plans
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centralized planning system that used to be the basis for China's economic system; eventually was transformed to a regional planning system leading to limited free enterprise
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Global Integration
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interdependency among the countries of the world, especially within financial markets and telecommunications
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Telecommunications
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long-distance communication, usually electronic, using communications satellites and fiber-optic cables
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Direct Foreign Investment (DFI)
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the purchase by foreigners of real estate and businesses in another country
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Multinationals
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firms that do business and have offices or factories in many countries
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Foreign Affiliates
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branches of multinational firms
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