Fundamental Concepts
This type of advantage occurs when a country can produce more of a good than another country using the same amount of resources.
What is Absolute Advantage?
This is the term for the most desirable alternative given up as the result of a decision.
What is Opportunity Cost?
This is the price of one nation's currency in terms of another nation's currency.
What is the Foreign Exchange Rate?
This is an official tax or duty imposed by a government on goods imported from other countries.
What is a Tariff?
This condition exists when the total value of a nation's exports is greater than the total value of its imports
What is a Trade Surplus?
This economic principle suggests countries should produce goods for which they have the lowest opportunity cost.
What is Comparative Advantage?
To calculate this for a specific good, you divide "what you give up" by "what you make."
What is the Opportunity Cost formula?
In this type of system, the value of a currency is determined entirely by the market forces of supply and demand.
What is a Floating Exchange Rate?
This trade barrier places a specific limit on the quantity of a good that can be imported during a given period.
What is a Quota?
This occurs when a country buys more from the world than it sells, resulting in a negative trade balance.
What is a Trade Deficit?
According to high school tradition, this item—usually blue or black—has the magical ability to vanish into a parallel dimension the moment you drop it on the floor.
What is A Pen?
If Country A can make 10 planes or 50 cars, this is the opportunity cost of making one plane.
What is 5 cars?
This term describes an increase in the value of a currency, making foreign imports cheaper for domestic consumers.
What is Appreciation?
This biological part of a cell is famously known as the "powerhouse," though nobody actually knows what it does other than appearing in every single meme.
What is the Mitochondria?
Many companies use this strategy of transferring business activities to external, often foreign, providers to reduce production costs.
What is Outsourcing?
This term describes the act of a country or business concentrating its productive efforts on a specific range of goods or services.
What is Specialization?
This visual model shows the maximum possible output combinations of two goods an economy can achieve.
What is the Production Possibilities Curve (PPC)?
This occurs when a currency loses value, making a country's exports more attractive and cheaper for foreign buyers.
What is Depreciation?
This general term refers to a pact between nations to reduce or eliminate barriers to the exchange of goods and services.
What is a Free Trade Agreement?
This social phenomenon occurs when a dominant nation’s culture exerts a heavy influence on another, often through trade and media.
What is Cultural Imperialism?
This production strategy involves breaking down a large task into smaller, repetitive tasks assigned to specific workers to increase efficiency.
What is Division of Labor?
Trade is considered beneficial because it allows nations to consume at a point located here on their PPC graph.
What is outside the curve?
This exchange rate system involves occasional government intervention to keep currency values within a specific range.
What is a Managed Exchange Rate?
This economic policy focuses on shielding domestic industries from foreign competition through the use of tariffs and quotas.
What is Protectionism?
This is the mathematical value of a country's total exports minus its total imports, a key component of GDP.
What are Net Exports?