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ECO230Y1 (4)
Chapter 1

Chapter 1 Review.docx

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Department
Economics
Course
ECO230Y1
Professor
Masoud Anjomshoa
Semester
Fall

Description
Economic Review Chapter 1  There is a long-term trend in the increase in trade  Both imports and exports have increased, imports have grown more, leading to a large excess of imports over exports for United States.  US pays for this through large inflows of capital, foreign investment in US economy.  Growing linkage between national capital markets  Plunge in 2009 caused by the 2008 global economic crisis shows the close links between world trade and economy International Economics  Seven themes reoccur throughout study of international economics 1) Gains of trade 2) Pattern of trade 3) Protectionism 4) Balance of payments 5) Exchange rate determination 6) International policy coordination 7) International capital market Gains from Trade  When countries sell goods and services to each other, this exchange is almost always beneficial  Two countries can trade to their mutual benefit even if one of them is more efficient than the other at producing everything (has absolute advantage)  Trade provides benefits by allowing countries to export goods whose production makes relatively heavy use of resources that are locally abundant while importing goods who production makes heavy use of resources that are locally scarce.  Trade also allows countries to specialize in producing narrower range of goods resulting in great efficiencies of large-scale production.  Benefits of international trade are not limited to tangible goods – international migration, borrowing and lending, exchanges of stocks and bonds.  International trade may hurt certain groups within nations and have a strong effect on the distribution of income. Patterns of Trade  Who sells what to whom?  David Ricardo proposed an explanation in terms of international differences in labour productivity.  Others have proposed that trade patterns are linked to the interaction between the relative supplies of national resources such as capital, labour, and land and the rela
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