International Trade And Absolute Advantage

1389 Words 6 Pages
Comparative and Absolute Advantage
This paper analyzes and compares the economic, political and cultural development of three countries; Australia, USA, and Canada. Further presents on measures of economic growth, comparative and absolute advantage in international trade. Economic statistics of the country, and reasons why their economy varies, and effects of international trade on their economic strength. Finally, analyze products that give the countries absolute and comparative advantage as well as factors that might prevent achievement of the two states.
Economic, Political, and Cultural development
Australia
Australia’s GDP for the year 2016 was 1.205 trillion US dollars. Australia’s economic growth rate is 2.8% per year. It has an unemployment
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From the three countries, US has the highest GDP which shows a high position in the world economy, Canada, and Australia are slightly lower. The other measures include inflation and unemployment rates. The inflation for both countries is low. Inflation rate indicates growth in aggregate demand and aggregate supply. Low inflation rates mean low-interest rates thus support international trade. Currency value also measures a country’s absolute and comparative advantage in international trade. Trade deficit or surplus between a country’s imports and exports estimate its value in international trade. The other measure is a country’s industrial production rate(Laursen, …show more content…
Canada has absolute advantage in cell phone production in international trade. The USA enjoys an absolute advantage when it comes to computers and packaged medicaments due to its skilled labor force who can produce more electronic equipment compared to Australia and Canada.
Factors that might prevent the three countries from achieving comparative and absolute advantage
The factors that may have prevented Australia, Canada, and the USA from achieving comparative and absolute advantage are trade tariffs and transportation costs that affect international trade. High inflation rates, which make exported products expensive and imported goods cheap. Another factor is trade barriers such as subsidy and tax. Taxes will discourage imports whereas grant makes exports competitive(Costinot, Donaldson, Vogel, & Werning, 2015).
Conclusion
In summary, Australia, Canada and USA trade with each other internationally. USA has the highest GDP compared to Australia and Canada. The reason for the difference is government policy, advanced technology among others. GDP, inflation, unemployment, export and import rates and currency value measure economic growth, comparative and absolute advantage of a country in international

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