notes for final exam

notes for final exam - External economics of scale CHAPTER...

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External economics of scale Cost savings that result from increases in the size of industries CHAPTER 17 Economic growth An increase in the total output of an economy Modern economic growth The period of rapid and sustained increase in output that began in the Western world with the industrial revolution Catch-up The theory stating that the growth of less developed countries will excess the growth rates of developed countries, allowing the less developed countries to catch up Aggregate production function Representation of the relationship between inputs and national output (GDP) Increase in GDP can be due to… o Labor supply increase o Physical/human capital increase o Productivity increase Labor productivity Output per worker hour The amount of output produced by an average worker in 1 hour Foreign direct investment (FDI) Investment in enterprises made in a country by residents outside that country Productivity of an input The amount of output produced per unit of an input Invention Advance in knowledge Innovation Use of new knowledge to produce a new product or to produce an existing product more efficiently CHAPTER 19 Trade surplus When a country exports more than it imports Trade deficit When a country imports more than it exports Corn laws Tariffs, subsidies, and restrictions enacted by British parliament in early 19 th century to discourage imports and exports of grain Ricardian Model of Production and Trade David Ricardo Assume that: 2 countries producing 2 goods and using 1 input (labor) Competitive market Static world Perfectly mobile labor Theory of comparative advantage Ricardo’s theory that specialization and
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free trade will benefit all trading partners (real wages will rise) even those that may be less efficient producers Absolute advantage Advantage in production of a good enjoyed by 1 country over another when it uses fewer resources to produce that good than the other country does Comparative advantage Advantage in production of a good enjoyed by 1 country over another when that good can be produced at lower cost in terms of other goods that it could be in the other country Allows gains from trade to occur Economic restructing Produces higher living standards in short-term restructuring in costly Factor endowments The quantity and quality of labor, land, and natural resources of a country Heckscher-Ohlin theorem Theory that explains the existence of a country’s comparative advantage by its factor endowments a country has a comparative advantage in production of a product if that country is relatively well endowed with inputs used intensively in the production of that product Protection Practice of shielding a sector of the economy from foreign competition Tariff Tax on imports Dumping Firm’s/industry’s sale of products on world market below cost of production Balance of payments Record of country’s transactions in goods, services, and assets with rest of world in a given period
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notes for final exam - External economics of scale CHAPTER...

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