Explain Related Terms to Production Possibility Frontier (PPF) Flashcards

The separation of a country from the world economy in an effort to protect its economy from the effects of the global market.

A graphical representation of the different combinations of goods that a country may produce during some period of time with the resources it has in its possession.

The cost of producing more of a certain good in foregone production of another good. Opportunity costs are crucial in considering comparative advantage and the possibility for mutual gains from trade.

A situation in which one state has a productive advantage over another in two (or more) goods, but trade can still be mutually beneficial due to the principle of comparative advantage.

One country has a comparative advantage over another in the production of a good if, in order to make one more unit of that good, it has to forego less of another good.

The rate at which goods will be exchanged between two states.

Any of a number of policies in which a country puts restrictions on incoming goods in an effort to protect the domestic economy.

A policy in which imports of a certain type of good are restricted (in theory temporarily) to allow for the development of the capacity to produce that good domestically.

A tax collected by the government on goods coming into the country.

Policies, such as anti-dumping duties, import quotas, or controlled government procurement, by which a state can control imports and import prices without imposing tariffs.

The marketplace in which individuals, firms, and even governments sell and buy foreign currencies.

The amount of one currency that must be offered to purchase one unit of a foreign currency.

A system in which a government allows supply and demand in foreign exchange markets to determine the exchange rate of its national currency.

A system in which a currency trades at a government-specified rate against a particular currency or a group of currencies, and the government intervenes in the foreign exchange market or takes monetary or fiscal policy measures to keep those rates in place.

A demand curve specifies the quantity of a good that consumers wish to purchase at different prices. Along with supply curves, demand curves can show the likely price of goods, including currencies, in international markets.