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The total number of goods and services produced in a given year + any foreign income - any interest or debt payments
Gross National Income
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The total goods and services produced in a given year
Gross Domestic Product
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What are the issues of measuring GDP and GNP?
- 1. They fail to distinguish ampong types of economic activity
- 2. Many goods and services generate costs that are not reflected in their prices
- 3. Many nuturing and creative activities are not included because they are not bought and sold
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the estimated number of dollars required to purchase comparitable goods in different countries
Purchasing Power Parity
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Explain the GINI index.
A society that scores 0.0 on the Gini scale has perfect equality in income distribution. Higher the number over 0 higher the inequality, and the score of 1.0 (or 100) indicates total inequality where only one person corners all the income.
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Explain the difference between the market and the coordinated economy.
Government holds stronger ownership of vital industries in coordinated market which keeps it more stable.
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What are some characteristics of American public policy?
- High educational spending
- Low support for working families
- Private, rather than public, services
- Tax breaks, not income support
- Low taxation
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What are the three factors of production? and what is defined as "capital?
- Land
- Labor
- Capital (anything that aids in the production of labor)
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What does comparitive advantage tell us?
- Every country has a comparitive advantage in something
- Every country can gain by specializing in what it does competitively well and trade for what it does less well
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What does the Stolper-Samnelson Theorem tell us?
- In an economy open to trade: The price of a country's abundant factor will rise
- The price of a country's scarce factor will fall
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What do trade policy preferences say about winners and losers of trade?
- Losers from trade want less trade and higher tariffs
- Winners from trade want more trade and lower tariffs
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How does European quality merchandise compare to that of American-made merchandise?
- better fine-tuning high quality
- better at niche products
- compete on quality, not price
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How do Americans compare to Europeans as far as manufacturing products?
- better at rapid innovation
- better at mass production
- compete on price, not quality
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How does America distinct itself from taxation, social spending, and inequality of income among its citizens?
- we tax less than Europe
- we spend less on education and socially
- inequality is higher
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Which countries have a comparitive advantage in capital and human labor?
Advanced Industrialized countries
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Which countries have a comparitive advantage in mature capital?
Asian Newly Industrialized nations
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How are tariffs and countries related?
- losers from trade want less trade and higher tareffs
- winners from trade want more trade and lower traiffs
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What are the four basic principles of the GATT/WTO?
- Market-based libertarialism
- non-discrimination
- reciprocity and progressive tariff reductions
- domesitc safeguards
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What are the consequences of no investment?
- no expansion of employment
- no productivity gains
- no economic growth
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What are the two strategies for structural transformation?
- Mobilize savings
- invest in productive activities
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What does ISI stand for?
Import Substitution Industrialization
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What does EOI stand for?
Export Oriented Industralization
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What is mercantilism?
The exporting of goods only, no imports, in order to maximize wealth
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