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Econ 270- Study guide

by: Hewan Ft

Econ 270- Study guide ECON 270

Hewan Ft

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About this Document

Important terms, statements and questions.
International economics
Bob Horn
Study Guide
Economics, International
50 ?




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This 2 page Study Guide was uploaded by Hewan Ft on Saturday September 17, 2016. The Study Guide belongs to ECON 270 at James Madison University taught by Bob Horn in Fall 2016. Since its upload, it has received 6 views. For similar materials see International economics in Economics at James Madison University.


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Date Created: 09/17/16
Econ­ 270 study guide Chapt 3 Important terms 1. GDP­ Gross domestic product 2. Trade index – index of openness­This states how much we trade­ AKA  what  proportion of trade makes up our GDP 3. Constant opportunity cost ­ when the PPC is a straight line and it is an equal  trade off for two items. 4. Autarky­ When a country is not open to trade and produces and consumes  domestic products 5. The trade Upper bound and lower bounce ­ the range in which both would  benefit is going to be between each country's individual costs of productions.  6. Why do some countries restrict imports from some goods knowing the  benefits of the Ricardian model? ­ Trade can have significantly harmful effects on  some segments of a country’s economy 7. International Trade theory states that voluntary trade is almost always  mutually beneficial. True/False? ­ True 8. Opportunity cost ­ the cost of what you give up for a certain gain. Chapt 4 Important terms 1. Factors of production­ natural resources, skilled & unskilled, capital 2. HO model (Heckscher­ohlin trade model)­ A country will produce and export  products in whichever resource they have the abundance in. 3. Relative scarcity­ implies that in autarky scarce factors are more expensive  inside a country. 4. When capital ratio is greater­ the country is capital abundant  5. Terms of trade­ the rate at two countries who trade are both benefiting 6. Terms of trade triangle­ the point where the a countries ppc touches the the  terms of trade line Vs how much the country consumes giving us how much they would  need to import to meet consumption demand. 7. Derived demand­ the demand for an input depends on the demand for the  output that the input is producing. 8. Stolper­ Samuelson theorem­ As we move along the curve towards our  comparative advantage the demands for the input of the opposite good go  down.Therefore, the increase in price of a good also increases the income of the factor  that produces it. 9. Magnification Effect­ The change in the output price has an even more  magnified effect on the factor input price. 10. Factor Price Equalization­ as a wages for workers in one country’s the less  abundant factor goes down, the wages in the country which does have an abundance in  that sector will go up and the wages will converge. (ex. Is low skilled workers wages in  US and Mexico) 11. Specific Factors Model­ in this model when a good is produced with a specific  factor, the factor is only used only in the production of that good. They are immobile 12. Variable Factor model­ variable factor model can be used to produce more than one good, are mobile between industries. 13. The Leontief Paradox­ If we rank by K/L = capital labour ratio 14. Supply push factors­ the factor inside a country that causes people inside to  want to leave 15. Demand Pull Factors­Forces that pull migrants to want to come to a country. 16. What is the impact of trade on employment in US­ It does not have an impact of the # of jobs in the USA but it changes the distribution of  jobs in the US 17. What lead to the decline in the manufacturing industry in the US­Technology and innovation which shifted the US job demands 18. Since WW2 the relative importance of raw materials in world trade has  decrease. True/False? =  True 19. Off­shoring­ movement of some or all of a firm's activities to a different country  than the origin. 20. outsourcing­ the reassignment of activities to another firm either inside or  outside the country. 21. When we invest abroad instead of exporting goods, we are choosing  foreign investment over foreign trade. True/False ­ True.


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