Absolute vs. Comparative Advantage
What is absolute advantage?
This occurs when a country can produce more of a good with the same resources than another country.
What is free trade?
This type of trade system allows goods to move between countries with minimal restrictions.
What is an exchange rate?
This term refers to how much of one currency can be exchanged for another.
What is a reserve currency?
This term describes a currency held by many countries as part of their reserves.
What is the unemployment rate?
This measures the percentage of people actively looking for work but unable to find jobs.
What is comparative advantage?
This concept focuses on producing goods at the lowest opportunity cost.
What is a tariff?
This is a tax placed on imported goods to protect domestic industries.
What is buy more foreign goods?
When the U.S. dollar is strong, American consumers can do this more easily in foreign markets.
What is the United States?
Since World War II, this country’s currency has dominated global trade.
What is inflation?
This economic condition occurs when prices rise and purchasing power falls.
What is comparative advantage?
This economic idea explains why countries benefit from specializing and trading rather than producing everything themselves.
What is an embargo?
Governments may use this complete restriction on trade with another country as a foreign policy tool.
What is purchasing U.S. exports?
A weak dollar generally makes this economic activity more attractive to foreign buyers.
What is fiat money?
When money is not backed by a physical commodity like gold, it is known as this.
What is GDP (Gross Domestic Product)?
This measure represents the total value of all goods and services produced in a country.
What is overdependence on imports or lack of economic diversity?
A country choosing to produce only one good to maximize efficiency may face this major economic risk.
What are environmental impacts or worker safety?
One major criticism of free trade is that it often ignores this factor related to production.
What is the foreign currency becoming stronger?
If too many dollars are exchanged for another currency, this shift may occur over time.
Who is Richard Nixon?
In 1971, this U.S. president ended the dollar’s link to gold.
What is GDP per capita?
This version of GDP accounts for population differences between countries.
What are human rights or workers’ rights concerns?
If a country has cheap labor but poor working conditions, this ethical issue becomes a factor in production decisions.
What are higher prices or fewer available goods?
While trade barriers protect domestic producers, this negative effect is often experienced by consumers.
What is supply and demand?
This cycle of currency strength between nations demonstrates this key economic principle.
What is economic or political leverage?
The U.S. can use the global demand for its currency as this type of international influence.
What is real GDP?
Economists use this adjusted form of GDP to compare economic data across time periods.