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INTST 101 (44)
Lecture

Chapter 6 in class lecture notes

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Department
International Studies
Course
INTST 101
Professor
Brian Orend
Semester
Fall

Description
Lecture 8 - Chapter 6 November6, 2013 7:10 PM International Trade and Business The Bucket aka The Economy Sum of all goods and services exchanged GDP - Nations Economy Sectors of the GDP Consumer - 50-66% MUSH - municipalities, universities, schools and hospitals Kind of non-profit and for profit Equation: C+G+I+(X-M) X -> exports -> when you sell to other countries M -> imports -> when you buy from other countries Decreases GDP Foundations of Economic Growth Natural resources Productivity Output per man hour Human resources Technology and inventions Social institutions Protect, enable, and incentivize Research and knowledge Generally, free-market capitalism, as previously discussed But since the Great Depression and the two world wars Now, the mixed economy Extensive Welfare State Physical infrastructure Health and safety standards Counter cyclical activity To smooth out the business cycle Education and health care Social safety net Unemployment and welfare programs Often, other, too e.g. government media USA only subsides one TV program, sesame street Department of education Laissez-faire capitalism Leads to a cyclical business cycle Expansion, peak, contraction, repeat Boom and bust cycle Exports > Imports Trade surplus Ex: china, japan, Germany, Saudi Arabia, Russia, Iran, Norway, Netherlands, Kuwait, Singapore Import > Exports Canada's largest trading partner Trade deficit USA, EU, China, Japan, Mexico Ex: USA has the world's biggest trade deficit Most trade dependent nations Largest percentage of GDP coming for foreign trade Ex: Belgium… Most actively traded goods Oil and Gas Gravity Theory of International Trade Electronics Small economies like Canada are forever trapped in the economic orbit of the Heavy machinery nearest largest economic body Iron No matter how hard you try, you can never escape gravity Coal steel Why Trade at All? Increase in Living Standards Overall via comparative advantage International equivalent of the domestic "division of labour" For the good of everyone, everyone should specialize in what they do best, produces as much as they can and trade the surplus to others Economists say that, an average, a country decision to participate in international trade raises its GDP by 20% to no international trade Three Trade Strategies 1. Autocracy or mercantilism a. Historical norm b. Not favoured anymore i. 20% pay cut ii. Government control, poverty, shady local products iii. Recipe for war - imperialismvs. colonialism 2. Free Trade/Internationalism a. 20% pay raise b. More freedom, wealth, best international products c. Interconnection reduces incentives, to go to war Anti-free-trade - protectionism Tariffs, quotas, government subsidies Nowhere is pure free-trade a reality Still, we give it a go, NAFTA and EU, MEROCUR, CARICOM 3. A blended strategy
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