International economics theory and policy Review Questions with Verified Answers Latest Update (Graded A+)

International economics theory and policy Review Questions with Verified Answers Latest Update (Graded A+) Gravity Model - Answers A model of comparative advantage that describes the level of interaction between two places, based on the size of their populations and their distance from each other. Gross Domestic Product (GDP) - Answers A measurement of the total goods and services produced within a country. developing countries - Answers countries with less productive economies and a lower quality of life service offshoring (service outsourcing) - Answers practice of hiring foreign workers or contracting with an international third party service provider to run service based functions of a particular industry opportunity cost - Answers Cost of the next best alternative use of money, time, or resources when one choice is made rather than another Ricardian Model - Answers explains how the level of a country's technology affects the wages paid to labor, such that countries with better technologies have higher wages production possibilities curve - Answers A curve that describes the maximum amount of one good that can be produced for every possible level of production of the other good. Production Possibilities Frontier (PPF) - Answers a diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it has available absolute advantage - Answers the ability to produce more of a given product using a given amount of resources partial equilibrium analysis - Answers the analysis of a single market in isolation, ignoring any feedbacks that may come from induced changes in other markets general equilibrium analysis - Answers the analysis of all the economy's markets simultaneously, recognizing the interactions among the various markets relative demand - Answers The ratio of the demand for one good to the demand for another relative demand curve - Answers The quantity demanded of one good divided by the quantity demanded of another good; how many units are demanded of a good for each unit demanded of another good relative supply curve - Answers the quantity supplied of one good divided by the quantity supplied of another good; how many units are supplied of a good for each unit supplied of another good gains from trade - Answers the extra output that trading partners obtain through specialization of production and exchange of goods and services Relative wages - Answers the wages of the domestic country relative to the wages in the foreign country pauper labor argument - Answers Foreign competition is unfair and hurts other countries when it is based on low wages Specialization - Answers the concentration of the productive efforts of individuals and firms on a limited number of activities derived demand - Answers Business demand that ultimately comes from (derives from) the demand for consumer goods. nontraded goods - Answers goods that are neither imported nor exported, for reasons like high transportation costs. Domestic produced and consumed products. unit labor requirement - Answers indicates the constant number of hours of labor required to produce one unit of output Mobile Factors - Answers Factors of production that can move between sectors. I.e., labor specific factors - Answers Factors of production that are unable to move into or out of an industry or sector. production function - Answers the relationship between quantity of inputs used to make a good and the quantity of output of that good Marginal product of labor - Answers the increase in the amount of output from an additional unit of labor diminishing returns - Answers stage where output increases at a decreasing rate as more units of variable input are added budget constraint - Answers all possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent; the boundary of the opportunity set labor mobility - Answers the ability and willingness of workers to relocate in markets where wages are higher U.S. Trade Adjustment Assistance program - Answers Provides extended unemployment coverage for an additional year and tuition reimbursement to workers who are displaced by Plant closure due to import competition or an overseas relocation to a country receiving preferential access to the United States wage convergence - Answers As the wages of migrant and local workers converge, and the labor market barriers are gradually eliminated, more adequate and integrated labor mobility across regions is expected to bring about a reduction of regional wage differentials. marginal product - Answers extra output due to the addition of one more unit of input total product - Answers All the goods and services produced by a business during a given period of time with a given amount of input Abundance of Factors - Answers Resource richness for production Heckscher-Ohlin Theory - Answers comparative advantage arises from differences in national factor endowments Factor Proportions Theory - Answers Countries produce and export goods that require resources (factors) in abundance, and import goods that require resources in short supply factors of production - Answers Land, labor, and capital; the three groups of resources that are used to make all goods and services factor prices - Answers The prices of the services of the factors of production. Expansion of production possibilities - Answers Occurs when the production possibility frontier shifts out much more in one direction than in another Heckscher-Ohlin Theorem - Answers "The country that is abundant in a factor exports the good who's production is intensive in that factor" Abundant Factor - Answers The resource of which a country has a relatively large supply Scarce factor - Answers The resource of which a country has a relatively small supply NAFTA (North American Free Trade Agreement) - Answers An agreement for free trade between the United States and Canada and Mexico Equalization of factor prices - Answers When factor prices in different countries become equalized (the same) due to international trade (convergence) factor content of trade - Answers The mix of factors of production used to produce a country's net exports Leontief Paradox - Answers The empirical finding that, in contrast to the predictions of the Heckscher-Ohlin theory, US exports are less capital intensive than US imports. Specific Factors Model - Answers a trade model that allows for mobile and immobile factors of production, as well as income distribution Standard Trade Model - Answers Nothing makes it difficult for factors of production current