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Macroeconomics Cheat Sheet (DRAFT) by

This is a draft cheat sheet. It is a work in progress and is not finished yet.

Compar­ative Advantage & Int'l Trade Gains

Opport­unity Cost
Highes­t-v­alued altern­ative that must be given up to engage in an activity
Compar­ative Advantage
Situation of producing at lowest opport­unity cost
Focusing production on highest Compar­ative Advantage
Absolute Advantage
Situation of being able to produce higher amounts than anyone else, given same resources
Situation in which a country doesn't trade with other countries
Terms Of Trade
Ratio of exports for imports in trade
Free Trade
Trading between countries without gov't restri­ctions
Numerical limit gov't imposes on quantity of good that can be imported
Voluntary Export Restraint (VER)
Agreement negotiated between 2 countries placing a limit on a quantity imported by a specific country
General Agreement on Tariffs and Trade(­GATT)
Countries agreed to reduce tariffs from very high levels of the 30's.
World trade organi­zation
int'l organi­zation that oversees intern­ational trade agreements
Process of countries becoming more open to foreign trade and investment
Think distin­ctive cultures are crushed, unfair payment to poorer countries, and large corpor­ations leave
Using trade barriers to shield domestic firms from foreign compet­ition (Saves jobs, protects high wages, protects infant industries & National Security)
Sources of Compar­ative Advantage
Relative abundance of labor and capital, climate & natural resources, techno­logy, external economies of scale
Tariff & Quota Effects
Consumers & Economy Lose, Producers Gain
Imports =
Amount of Consum­ption - Amount of production at a price
Trade Restri­ctions
the U.S. economy would gain from the elimin­ation of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Chapter 8 GDP

Growth Rate
% Change in RGDP (Ending - beginning) / beginning * 100