Free trade / trade protectionism
what is the difference between absolute advantage and comparative advantage?
Absolute advantage: the ability to produce the same amount of goods using less input than another producer
comparative advantage: the ability to produce the same amount of goods with a lower opportunity cost than another producer
what is the difference between current expenditures, capital expenditures, and transfer payments?
current expenditures: gov spending to cover daily operation costs
capital expenditures: gov spending on building capital goods / infrastructure
transfer payments: direct monetary payment with no purchasing being done (e.g. subsidies)
using a PPC, show an economy's SR growth and its LR growth. what is the difference between these two types of growth?
SR growth: increase in actual output
LR growth: increase in potential output
what is the difference between microeconomics and macroeconomics?
microeconomics: the study of individual firms' behavior
macroeconomics: the study of economy wide phenomena
what are the sources of government revenue?
direct / indirect taxation, sale of goods and services from state owned enterprises, sale of government assets
why might countries impose trade protectionism?
- protection of infant industries
- national security
- health and safety
- unfair competition
- gov revenue
- protection of jobs etc.
using an AD AS diagram, explain the effects of expansionary and contractionary fiscal policies to close inflationary and recessionary gaps
how can fiscal policies change the aggregate supply?
:D
what is the consumer price index? how to calculate it?
the measure of the change in costs of a typical basket of goods over time
(cost of current year / cost of base year) x 100
what are the four factors of production and their respective payments?
wages, rent, interest, profit
what are the objectives and functions of the WTO?
functions: operates the global system of trade rules and helps developing countries improve their capacity to trade (copied from the official website)
objectives: to help its members use trade as a means to raise living standards, create jobs and improves people's lives
using a diagram, show an exporting country and an importing country with free trade
:P
using a money market diagram, explain how equilibrium interest rates are determined by money demand and money supply
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what is the difference between cost-push and demand pull inflation? use a diagram to explain
:3
draw a business cycle diagram
:O
what are the types of money? what is the difference between M1 and M2 money?
fiat money: the coins and money backed by a government (e.g. US dollars)
commodity money: the goods that have an agreed value (gold coins)
M1 money is more liquid (checkable deposits, money in circulation) than M2 money (saving deposits, money market funds etc.)
what are some other methods of trade protectionism (excluding tariffs)?
import quotas: the country can only import a certain amount of goods from other countries
export subsidies: a subsidy imposed on exported goods
administrative barriers: regulations applied to imported goods
what is the multiplier effect? what is the crowding out effect? what are the strengths and constraints of fiscal policies?
multiplier effect: extra shifts in AD due to additional consumption
strengths: targets specific economic sectors, more direct in deep recessions
crowding out effect: decreased shifts in AD due to dropping investment
constraints: time lags, gov's pressure on sustainable debt
what are the four types of unemployment? what are their differences? what is the natural rate of unemployment?
cyclical, structural, frictional, seasonal
NRU: 0 cyclical unemployment
what are the shifters of AD? why is the AD downward sloping?
C, I, G, NX
wealth effect, interest rate effect, exchange rate effect
what are the drawbacks of monetary policies?
less direct, rely on incentives
government: collects revenue
consumers: pay higher than free trade
domestic producers: face less foreign competition, but higher price
foreign producers: receive a lower price
domestic importers: pay higher price
using a money market diagram, explain the tools used by the central bank to control money supply: required reserve ratio, discount rates, and open market operations, and their respective changes to money supply / demand
:)
how is cyclical unemployment caused by a fall in aggregate demand? use a diagram to explain
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draw and explain a keynesian model
:C
draw a labor market diagram and explain the relationship between minimum wage laws and unemployment.
:7