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18 Cards in this Set
- Front
- Back
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What portion of world trade occurs in merchandise and services |
80% merchandise 20% services |
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What is the relationship between trade and world output? |
world output impacts trade in the following ways: growing output = growing trade sluggish output = sluggish trade world trade grows faster than world output |
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Describe the broad pattern of international trade |
-The pattern of international trade in merchandise is dominated by flows among wealthy nations |
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Why is a nation's level of trade dependence or independence on trade important? |
j |
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What is meant by the term absolute advantage? Describe how it works using a numerical example. |
d
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What is meant by the term comparative advantage? How does it differ from an absolute advantage? |
d |
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Explain why countries can gain from trade even without having an absolute advantage. |
trade is still beneficial if one country is less efficient in the production of two goods, so long as it is less inefficient in the production of one good.
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What does the factor proportions theory have to say about a nation's imports and exports? |
d
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Identify the two categories of national resources in the factor proportions theory. What is the Leontief paradox? |
d
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What are the 3 stages of the international product life cycle theory? Identify its limitations. |
d
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What is the new trade theory? Explain what is meant by the term first-mover advantage. |
d
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Describe the national competitive advantage theory. What is an "advanced" factor? |
s
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What are the four elements and two influential factors of the Porter diamond? |
dd |
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Describe mercantilism and explain its impact on world powers and their colonies. |
Mercantilism states that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports. |
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Key element of mercantilism |
to increase wealth by maintaining a trade surplus, the condition that results when the value of a nations exports is greater than the value of its imports. |
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What are 3 key assumption of mercantilism |
1. Assumes that a nation increases its wealth only at the expense of other nations - a zero sum game 2. to intervene actively international trade in order to maintain a surplus 3. acquisition of colonies to serve as sources of inexpensive raw materials and as markets for higher priced finished goods. |
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Explain the theory of absolute advantage |
AA allows a country to produce goods in which it holds an absolute advantage and trade with other nations to obtain goods it needs but does not produce - a positive-sum game |
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Explain the theory of comparative advantage |
holds a CA in the production of a good when it is unable to produce the good more efficiently than other nations but can produce it more efficiently than it can any other good. |
