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PSCI 281 - Trade.pdf

2 Pages

Political Science
Course Code
PSCI 281
Veronica Kitchen

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Handout – Trade PSCI 281 Key Questions Why do we trade? How is the global trading system governed? Key Concepts Comparative Advantage: A liberal theory of trade that says that states should produce and exports only those goods that they can produce most efficiently, and import those they can produce less efficiently. Balance of Trade: The difference in monetary value between a country’s exports and imports. If exports are greater than imports, a state is in a balance of trade surplus; if its imports exceed its exports, it is in a balance of trade deficit. Balance of Payments: All the flows of money in and out of a country. Includes the balance of trade (current account), capital flows (including foreign direct investment and portfolio investment) and changes in reserves. Money going in must equal money going out. Hegemonic Stability Theory: A realist theory which holds that the norms of the liberal economic trading system must be upheld by a hegemon who has both the will and the capacity to enforce the rules. In the economic context, Charles Kindleberger argued the hegemon must: a) Guarantee an open market b) Act as lender of last resort (counter-cyclical lending) c) Act as reserve currency d) C
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