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11 Cards in this Set
- Front
- Back
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International Division of Labor
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Specialization by nations in the production of only a few goods
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Mercantilism
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A system of government policies and institutions aimed at increasing exports and decreasing imports
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Constant returns to Scale
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A technological relationship such that proportionate changes in inputs lead to proportionate changes in output
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Absolute Advantage
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The ability of a country to produce a good using fewer productive inputs than is possible anywhere else in the world
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Comparative Advantage
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A country has comparative advantage in a good if the product has a lower pretrade relative price than is found elsewhere in the world
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Terms of Trade
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The relative price at which trade occurs between countries
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Consumption possibility Frontier
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The various bundles of goods that a country can obtain by taking advantage of international trade
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Trade Triangle
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A geometric device that tells us the amounts a country is willing to trade at a particular world price
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Walras Law
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In a world with n markets, if n-1 are in equilibrium, so is the nth
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Reciprocal Demand
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The process of international interaction of demand and supply necessary to produce an equilibrium international price
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Importance of Being Unimportant
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When a small country trades with a big country, the small is likely to enjoy most of the mutual gains from trade
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