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In what ways can international trade contribute to economic development of a nation? What are its shortcomings?
1. Can lead to full utilization of domestic resources
2. Makes possible division of labor and economies of scale--by expanding the size of the mkt
3. Vehicle for transmission of new ideas & tech
4. Stimulates int'l flow of capital from developed countries to developing countries
5. Excellent anti-monopoly weapon--stimulates efficiency from domestic producers
Shortcomings:
- When developing nations gains from trade go to developed nations, there is still dissatisfaction
Describe the different terms of trade (commodity, net barter, income, single factoral and double factoral). Which of these terms are most significant for developing nations?
Commodity/Net Barter - (Px/Py) * 100
Income - (Px/Pm) * Qx
Single Factoral - (Px/Pm) * Zx
Double Factoral - (Px/Pm) * (Zx/Zm) * 100
End
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