Term
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Definition
produce what you consume "No Trade"
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Term
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Definition
- produce some and trade for other goods
- "Specialize and Trade"
- The rule is to produce goods/services with the lowest opportunity cost
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Term
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Definition
| the ability to produce using fewer resources than others |
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Term
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Definition
| the ability to produce something at a lower opportunity cost |
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Term
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Definition
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Term
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Definition
| a limit on quantity of a good imported |
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Term
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Definition
the record of transactions between a country and the rest of the world - includes the current account and the capital account
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Term
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Definition
trackes the exchange of: goods & services current income from investments gifts |
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Definition
Tracks the exchange of: ownership rights to real/financial assets extension of loans |
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Term
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Definition
| more payments flowing out than in |
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Term
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Definition
| more payments flowing in than out |
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Term
| the Market for Foreign Exchange |
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Definition
Price: the exchange rate Good: the foreign currency |
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Term
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Definition
| the price of a unit of foreign currency |
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Term
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Definition
| decrease in number of dollars to buy a unit of foreign currency |
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Term
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Definition
increase in the number of dollars to buy a unit of foreign currency also is known as a decrease in the value of dollar and an increase in the exchange rate |
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Term
| Three Factors affecting the supply in the currency market |
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Definition
- if there is a demand for US goods and services there is an increase in supply
- if there is a demand for assets there is an increase in supply
- is the quantity of foreign currency supply increases
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Term
| Three Key Factors Affecting the Demand in the Currency Market |
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Definition
- if there is a demand for foreign goods and services there is an increase in demand
- if there is a demand for foreign assets there is an increase
- the supply of US currency increases
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Term
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Definition
| with an annual growth rate of x percent the level of a variable doubles every 70/x years |
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Term
| Solow I: Diminishing Returns |
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Definition
- 1956-1957
- started with two assumptions
- rich nations have more capital goods
- investment and growth go together
- important conclusions:
- marginal product of capital is positive
- marginal product of capital decline
- important results:
- steady state: no new net investment, no new growth
- convergence: rich countries stop growing, poor nations grow
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Term
| Solow II: Technology Matters |
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Definition
| Solow I + exogenous technology |
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Term
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Definition
- endogenous
- institutions matter
- institutions create incentives
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Term
| Institutions that Foster Growth |
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Definition
- political stability and rule of law
- private property rights
- stable moey and prices
- taxes high enough to provide effective government
- taxes low enough to provide profitable production
- international trade
- flow of capital across borders
- competitive markets
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Term
| Three sources of economic growth |
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Definition
- technology
- resources
- institutions
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