Business notes 2

Business notes 2 - Economic growth o An increase in a...

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Economic growth o An increase in a nations output of goods and services o The more a nation produces the higher its standard of living o Drawbacks of economic growth: Pollution Strain on public facilities Types of unemployment: o Frictional: short term unemployment that is not related to the business cycle o Structural: unemployment that is caused by a mismatch between jobs and workers o Cyclical: unemployment that occurs when a downturn in the business cycle reduces demand for labor o Seasonal: unemployment that occurs during specific seasons in certain industries. Types of inflation o Demand-Pull: demand for goods and services is greater that the supply o Cost-Push: increases in production costs push up prices. Achieving Macroeconomic Goals o Monetary Policy Contractionary policy Expansionary policy o Fiscal policy Spending Taxation Balance of trade o Balance of trade: the difference between the value of a country’s exports and the value of its imports during a certain time. o Balance of payments: a summary of a country’s international financial transactions showing the difference between the country’s payments to and its receipts from other countries o Floating exchange rate: a system in which prices of currencies move up and down based upon the demand for a supple of the various currencies Why Nations Trade o Absolute advantage: a country can produce and sell products at a lower cost and is the only provider of a product o Comparative advantage: a country should specialize in the products that it can produce most readily and cheaply, and trade these for goods that foreign countries can produce most readily and cheaply The fear of trade and globalization o Millions of Americans have lost their jobs o Millions fear losing their jobs o Employers threaten to export jobs if workers do not accept pay cuts
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o Service and white collar jobs are vulnerable to operations move Benefits of globalization o Productivity grows more quickly when countries produce goods and services in which they have a comparative advantage o Global competition and cheap imports keep prices down o An open economy spurs innovation o The U.S. buys $2 trillion a year from other countries o Prices for many heavily traded goods have fallen o Income from U.S. foreign subsidiaries is $200 billion a year Barriers to trade o Major obstacles to international trade: Natural barriers: mountains, oceans, etc. Tariff barriers: Non-tariff barriers: For and Against Tariffs o For Protect infant industries, protect American jobs, aid in military preparedness o Against Discourage free trade Raise prices Non Tariff barriers: o Import quotas o Embargos o Buy-national regulations o Exchange controls International economic communities o Preferential tariff A tariff that is lower for some nations than for others o Free-trade zone An area where the nations allow free, or almost free, trade among
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This note was uploaded on 04/14/2008 for the course BUS 1750 taught by Professor Reck during the Fall '07 term at Western Michigan.

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Business notes 2 - Economic growth o An increase in a...

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