1. The document discusses international trade and the economic linkages between countries, including goods and services flows, capital and labor flows, and financial flows.
2. It explains the principle of comparative advantage and how specialization and trade allow countries to increase total production through gains from specialization even if one country is more productive in all areas.
3. Several multilateral agreements aimed to reduce trade barriers and promote free trade, including the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), which oversees international trade agreements and disputes.
International Marketing 14th Edition Cateora Test BankIllanaIllana
Full download : http://alibabadownload.com/product/international-marketing-14th-edition-cateora-test-bank/ International Marketing 14th Edition Cateora Test Bank
Test bank-for-international-marketing-15th-edition-by-cateora-downloaddomabermta
Product Details
Language: English
ISBN-10: 007352994X
ISBN-13: 978-0073529943
ISBN-13: 9780073529943
Relate keyword
Download International Marketing 15th Edition by Cateora
International Marketing 15th Edition free download
Ebook International Marketing 15th Edition
Instant download International Marketing 15th Edition answer
Test Bank International Marketing 15th Edition download pdf
International Marketing 15th Edition test bank
- Mercantilists believed that trade was a zero-sum game and that nations could only gain wealth at the expense of others through maximizing exports and minimizing imports.
- Adam Smith introduced the concept of absolute advantage, where nations can both benefit from trade by specializing in producing goods they have absolute efficiency in and trading for goods they have absolute disadvantages in.
- David Ricardo later developed the principle of comparative advantage, showing that even if one nation is less efficient at producing all goods, nations can still gain from trade by specializing in the good where their productivity disadvantage is least and importing the good where it is greatest.
Latin America is the region of the Americas where Romance languages like Spanish and Portuguese are primarily spoken. Infrastructure and levels of development vary significantly across Latin American countries. Many countries still face challenges of poverty and are considered developing. Economic indicators like GDP, GNP, and per capita income are used to measure and compare levels of development between developing, transition, and developed nations. The geography of Latin America is diverse, containing rainforests, isthmuses, mountainous regions, and deserts. International agreements and trade blocs have aimed to increase economic integration and development across the Americas.
The document discusses international trade and David Ricardo's theory of comparative advantage. It provides:
1) An overview of international trade concepts including exports, imports, and how countries can specialize in goods they have a comparative advantage in producing.
2) A biography of David Ricardo, the economist who developed the theory of comparative advantage, showing how trade benefits both parties even if one country is more efficient in all areas.
3) Examples using labor requirements to illustrate Ricardo's model of comparative advantage between Portugal and England. This shows how both countries can gain from specializing and trading based on their opportunity costs.
International Business Midterm AssignmentStacey Troup
1. The document discusses strategies for expanding an automotive company called XYZ Motors into the Indian market over the short term of 3-5 years.
2. It recommends establishing manufacturing facilities in India to take advantage of various tax incentives and proximity to existing Japanese headquarters. New smaller cars could be designed for the Indian market.
3. Management styles between Japan and India are similar, focusing on teamwork and explicit instructions, so a Japanese management team would be better than American for the Indian expansion. Embracing diversity will also be important for success.
4. Social responsibility programs for local charities are encouraged both in India and the US and will help XYZ Motors attract employees and build its public profile in India.
International trade occurs when goods and services are exchanged between countries. Countries specialize in producing goods where they have a comparative advantage, allowing for increased productivity and economic interdependence. David Ricardo developed the theory of comparative advantage to show that even if a country is less efficient in all products, it can still gain from trade by specializing in the product where its opportunity costs are lowest. Trade barriers like tariffs and quotas restrict trade but also raise prices, while free trade allows for lower consumer prices and more competition between producers.
international trade and balance of payments for 2nd semester economics for BBAginish9841502661
This document discusses international trade and the gains from trade according to comparative advantage theory. It provides evidence that countries who liberalized trade grew faster than those who did not. While comparative advantage theory predicts patterns of trade well, it oversimplifies specialization and does not account for differences in resources or economies of scale between countries. The model also ignores potential negative impacts of trade like income distribution effects.
International Marketing 14th Edition Cateora Test BankIllanaIllana
Full download : http://alibabadownload.com/product/international-marketing-14th-edition-cateora-test-bank/ International Marketing 14th Edition Cateora Test Bank
Test bank-for-international-marketing-15th-edition-by-cateora-downloaddomabermta
Product Details
Language: English
ISBN-10: 007352994X
ISBN-13: 978-0073529943
ISBN-13: 9780073529943
Relate keyword
Download International Marketing 15th Edition by Cateora
International Marketing 15th Edition free download
Ebook International Marketing 15th Edition
Instant download International Marketing 15th Edition answer
Test Bank International Marketing 15th Edition download pdf
International Marketing 15th Edition test bank
- Mercantilists believed that trade was a zero-sum game and that nations could only gain wealth at the expense of others through maximizing exports and minimizing imports.
- Adam Smith introduced the concept of absolute advantage, where nations can both benefit from trade by specializing in producing goods they have absolute efficiency in and trading for goods they have absolute disadvantages in.
- David Ricardo later developed the principle of comparative advantage, showing that even if one nation is less efficient at producing all goods, nations can still gain from trade by specializing in the good where their productivity disadvantage is least and importing the good where it is greatest.
Latin America is the region of the Americas where Romance languages like Spanish and Portuguese are primarily spoken. Infrastructure and levels of development vary significantly across Latin American countries. Many countries still face challenges of poverty and are considered developing. Economic indicators like GDP, GNP, and per capita income are used to measure and compare levels of development between developing, transition, and developed nations. The geography of Latin America is diverse, containing rainforests, isthmuses, mountainous regions, and deserts. International agreements and trade blocs have aimed to increase economic integration and development across the Americas.
The document discusses international trade and David Ricardo's theory of comparative advantage. It provides:
1) An overview of international trade concepts including exports, imports, and how countries can specialize in goods they have a comparative advantage in producing.
2) A biography of David Ricardo, the economist who developed the theory of comparative advantage, showing how trade benefits both parties even if one country is more efficient in all areas.
3) Examples using labor requirements to illustrate Ricardo's model of comparative advantage between Portugal and England. This shows how both countries can gain from specializing and trading based on their opportunity costs.
International Business Midterm AssignmentStacey Troup
1. The document discusses strategies for expanding an automotive company called XYZ Motors into the Indian market over the short term of 3-5 years.
2. It recommends establishing manufacturing facilities in India to take advantage of various tax incentives and proximity to existing Japanese headquarters. New smaller cars could be designed for the Indian market.
3. Management styles between Japan and India are similar, focusing on teamwork and explicit instructions, so a Japanese management team would be better than American for the Indian expansion. Embracing diversity will also be important for success.
4. Social responsibility programs for local charities are encouraged both in India and the US and will help XYZ Motors attract employees and build its public profile in India.
International trade occurs when goods and services are exchanged between countries. Countries specialize in producing goods where they have a comparative advantage, allowing for increased productivity and economic interdependence. David Ricardo developed the theory of comparative advantage to show that even if a country is less efficient in all products, it can still gain from trade by specializing in the product where its opportunity costs are lowest. Trade barriers like tariffs and quotas restrict trade but also raise prices, while free trade allows for lower consumer prices and more competition between producers.
international trade and balance of payments for 2nd semester economics for BBAginish9841502661
This document discusses international trade and the gains from trade according to comparative advantage theory. It provides evidence that countries who liberalized trade grew faster than those who did not. While comparative advantage theory predicts patterns of trade well, it oversimplifies specialization and does not account for differences in resources or economies of scale between countries. The model also ignores potential negative impacts of trade like income distribution effects.
This document provides the questions from a GBM 381 final exam. It includes 25 multiple choice questions covering topics like comparative advantage, trade barriers, balance of payments, and exchange rates. It also includes 4 short essay questions asking students to discuss theories of international trade like mercantilism and Heckscher-Ohlin, and address statements about tariffs and monetary policy under fixed exchange rates. The document encourages students to download the answers.
RICARDO-1.ppt it tells information theoryHoneyiaSipra
1) Adam Smith introduced the concept of absolute advantage, where countries should trade based on which goods they can produce more efficiently.
2) David Ricardo later developed the theory of comparative advantage, showing that even if one country is less efficient overall, both countries can still benefit from trade by each specializing in what they have a comparative rather than absolute advantage in producing.
3) Ricardo's theory assumes two countries and two goods, constant costs, and labor as the only factor of production. It demonstrates that when countries specialize according to their comparative advantages, global production is maximized.
Adam Smith first proposed that absolute advantage in production provides the basis for mutually beneficial trade. David Ricardo later refined this to show that comparative advantage, not absolute advantage, is the key - a country should specialize in what it can produce relatively more efficiently. Empirical studies have supported Ricardo's theory, finding nations export more of goods where they have lower relative production costs. While useful, Ricardo's model does not fully explain differences in productivity or trade's impact on factor incomes.
This document discusses international trade and balance of payments. It provides arguments for and against trade liberalization. Supporters argue that trade increases specialization and economies of scale, bringing innovation and competition. Studies show countries that liberalized trade grew faster. However, critics argue that trade can displace domestic workers and increase inequality. The document also examines the Ricardian model of comparative advantage and its limitations in making unrealistic predictions. It defines key concepts like terms of trade, protectionism, and balance of payments accounting.
There are three principal differences between how economists and noneconomists view international trade: 1) Economists see all forms of trade as equally advantageous, while noneconomists favor trading within one's own group. 2) Economists believe imports and exports are both good for the economy, while noneconomists favor exports. 3) Economists believe a country's trade balance depends on many factors like savings and investment, while noneconomists focus on competitiveness. Economists view trade as increasing efficiency through specialization and comparative advantage, while noneconomists emphasize tribal rivalries.
Law of Comparative Advantage by Dominick SalvatoreVishwasGupta45
The document discusses the theories of absolute advantage, comparative advantage, and gains from trade. It explains that according to absolute advantage, nations should trade when one has an advantage in producing one good over another. Comparative advantage expands this to say that even if a nation is worse at producing both goods, it should still specialize in the good where its disadvantage is smallest. This allows both nations to increase total production and consumption through specialization and trade. Diagrams of production possibility frontiers are used to illustrate how gains from trade arise from specialization enabled by comparative advantage.
This document discusses the theory of comparative advantage. It provides background on the theory, which was first described by Robert Torrens in 1815 and later formalized by David Ricardo. Ricardo used a numerical example to show that even if one country has an absolute advantage in all goods, both countries can still benefit from trade based on their comparative advantages. The document also outlines Ricardo's assumptions, provides his numerical example comparing Kenya and Ethiopia, and discusses limitations of the theory.
The document summarizes several theories of international trade:
1) Mercantilism focused on accumulating gold through trade surpluses. Countries aimed to export more than import through tariffs and subsidies.
2) Absolute advantage theory says countries should specialize in goods they produce most efficiently. If each country focuses on its absolute advantage, global production increases.
3) Comparative advantage theory expanded on this, showing even without an absolute advantage, specializing in your comparative advantage - where you have the lowest opportunity cost - benefits all trading partners.
4) The Heckscher-Ohlin model predicts trade patterns based on whether a country is abundant in labor or capital. Labor-abundant countries export labor
International Trade Theories document discusses several theories of international trade:
1. Mercantilism advocated accumulating wealth through exports and limiting imports using government policies.
2. Adam Smith's absolute advantage theory states that countries should specialize in goods they can produce more efficiently.
3. David Ricardo's comparative advantage theory recognizes that even without an absolute advantage, mutual trade benefits are possible if countries specialize in goods with lower opportunity costs of production.
From the textbook (Colander, David C. Macroeconomics, 7th Edition.docxMARRY7
From the textbook (Colander, David C. Macroeconomics, 7th Edition. McGraw-Hill Learning
Solution
s) read the following chapters:
16: International Trade Policy, Comparative Advantage, and Outsourcing
17: International Financial Policy
16: International Trade Policy, Comparative Advantage, and Outsourcing
One of the purest fallacies is that trade follows the fl ag. Trade follows the lowest price current. If a dealer in any colony wished to buy Union Jacks, he would order them from Britain's worst foe if he could save a sixpence.
—Andrew Carnegie
Patterns of Trade
Before I consider these issues, let's look at some numbers to get a sense of the nature and dimensions of international trade.
Increasing but Fluctuating World Trade
In 1928, total world trade was about $500 billion (in today's dollars). U.S. gross domestic product (GDP) was about $830 billion, so world trade as a percentage of U.S. GDP was almost 60 percent. In 1935, that ratio had fallen to less than 30 percent. In 1950 it was 20 percent. Then it started rising. Today it is about 250 percent, with world trade amounting to about $32 trillion. As you can see, international trade has been growing, but with significant fluctuations in that growth. Sometimes international trade has grown rapidly; at other times it has grown slowly or has even fallen.
In part, fluctuations in world trade result from fluctuations in world output. When output rises, international trade rises; when output falls, international trade falls. Fluctuations in world trade are also in part explained by trade restrictions that countries have imposed from time to time. For example, decreases in world income during the Depression of the 1930s caused a large decrease in trade, but that decrease was exacerbated by a worldwide increase in trade restrictions.
Differences in the Importance of Trade
The importance of international trade to countries' economies differs widely, as we can see in the table below, which presents the importance of the shares of exports—the value of goods and services sold abroad—and imports—the value of goods and services purchased abroad—for various countries.
Among the countries listed, the Netherlands has the highest amount of exports compared to total output; the United States has the lowest.
The Netherlands' imports are also the highest as a percentage of total output. Japan's are the lowest. The relationship between a country's imports and its exports is no coincidence. For most countries, imports and exports roughly equal one another, though in any particular year that equality can be rough indeed. For the United States in recent years, imports have generally significantly exceeded exports. But that situation can't continue forever, as I'll discuss.
Total trade figures provide us with only part of the international trade picture. We must also look at what types of goods are traded and with whom that trade is conducted.
What and with Whom the United States Trades
The majority of U.S. ...
International trade allows countries to specialize in goods they can produce efficiently and trade for goods from other countries. This benefits all countries as it allows them to consume goods they otherwise could not. While free trade has benefits, it also presents challenges as globalization has shifted many manufacturing jobs to countries with lower labor costs. As the global economy continues to integrate, governments and world leaders will need to address issues around protecting domestic industries and citizens who lose jobs and income as a result of free trade.
This document provides an outline for a chapter that discusses international trade and factor mobility theory. It begins with an opening case study on Costa Rica's economic transformation through international trade and foreign investment policies. The chapter then covers various trade theories including mercantilism, absolute advantage, comparative advantage, and theories explaining trade patterns based on country size, factor proportions, and country similarity. It also discusses how the location of production shifts over the product lifecycle and how national competitive advantages can develop and change. In concluding, the chapter discusses the relationship between international trade and the mobility of production factors like labor and capital.
- No class will be held next week on July 26th, 2010.
- The midterm exam is scheduled for August 2nd, 2010 from 8:45-10:15.
- Today's lecture slides can be found online at the provided link.
international trade theories business conceptsBojamma2
International trade theories provide explanations for why trade occurs between countries. Early theories included mercantilism, which argued that countries should encourage exports and discourage imports to accumulate gold and silver. Adam Smith proposed absolute advantage based on a country's ability to produce goods more efficiently. David Ricardo introduced comparative advantage, which recognizes specialization based on relative rather than absolute costs. Later theories examined factors like resource endowments (Heckscher-Ohlin theory) and the stages of a product's life cycle (Vernon's theory).
This document summarizes several theories of international business and trade. It discusses theories including absolute advantage, comparative advantage, factor proportions theory, product life cycle theory, and theories related to country size, similarity, and dependence. The theories aim to explain patterns of specialization and trade between countries based on factors such as resources, costs, demand, and political/cultural relationships.
International trade theories aim to explain why trade occurs between countries. Classical theories from the 18th-19th centuries focused on advantages at a country level, such as absolute advantage based on production efficiency or comparative advantage based on opportunity costs. Modern theories from the 20th century examine advantages at a firm level, such as country similarity theory that intraindustry trade increases between countries with similar consumer preferences and incomes. Overall, international trade is complex and cannot be fully explained by a single theory, as our understanding continues to evolve with globalization.
International trade theory provides several explanations for why countries engage in trade. Absolute advantage suggests countries should specialize in what they produce most efficiently. Comparative advantage argues that trade benefits both parties even if one country is more efficient in all goods. Heckscher-Ohlin asserts countries export goods intensive in their abundant factors and import goods intensive in scarce factors. New trade theory cites economies of scale and first-mover advantages as additional sources of comparative advantage. Porter's diamond identifies factor conditions, demand, related/supporting industries, and firm strategy/rivalry as determinants of national competitive advantage.
This presentation covers the fundamental concepts and models related to the study of international trade. It includes discussions on comparative advantage, international trade models, and trade policies. The aim is to provide a basic understanding of the theories of the international trade.
This document provides a summary of an economics quiz containing 30 multiple choice questions related to concepts like monopoly, perfect competition, elasticity, and costs. Some key details include:
- Questions cover topics like competitive market structures, supply and demand curves, costs of production, and pricing strategies of monopolies.
- Multiple choice answers assess understanding of how markets, costs, and prices are impacted by things like taxes, changes in inputs, and different market structures.
- The quiz questions provide diagrams and data to apply economic concepts to real world market scenarios.
This document contains 25 multiple choice questions from an economics quiz on topics related to perfect competition, monopoly, and price discrimination. The questions cover concepts like market structures, demand and supply curves, profit maximization, and price differentiation strategies. Sample questions ask about the impact of taxes on producers, conditions that define perfect competition, and factors that influence a monopolist's pricing decisions.
The document contains 3 demand questions about how price and income affect quantity demanded.
1) If price of apples decreases, quantity of apples demanded will increase.
2) If income increases and demand for steak increases, steak is a normal good.
3) If income increases and demand for thrift shoes decreases, thrift shoes are an inferior good.
This document discusses the concepts of price elasticity of demand and supply. It begins by introducing price elasticity and how it measures the responsiveness of quantity demanded or supplied to changes in price. It then provides formulas for calculating the price elasticity coefficient and discusses what values indicate elastic versus inelastic demand. The document also examines graphical analysis of elasticity and how it varies along a demand curve. It analyzes applications of elasticity concepts and discusses determinants of a good's price elasticity. Finally, it briefly introduces other types of elasticity like cross elasticity of demand and income elasticity of demand.
This document provides the questions from a GBM 381 final exam. It includes 25 multiple choice questions covering topics like comparative advantage, trade barriers, balance of payments, and exchange rates. It also includes 4 short essay questions asking students to discuss theories of international trade like mercantilism and Heckscher-Ohlin, and address statements about tariffs and monetary policy under fixed exchange rates. The document encourages students to download the answers.
RICARDO-1.ppt it tells information theoryHoneyiaSipra
1) Adam Smith introduced the concept of absolute advantage, where countries should trade based on which goods they can produce more efficiently.
2) David Ricardo later developed the theory of comparative advantage, showing that even if one country is less efficient overall, both countries can still benefit from trade by each specializing in what they have a comparative rather than absolute advantage in producing.
3) Ricardo's theory assumes two countries and two goods, constant costs, and labor as the only factor of production. It demonstrates that when countries specialize according to their comparative advantages, global production is maximized.
Adam Smith first proposed that absolute advantage in production provides the basis for mutually beneficial trade. David Ricardo later refined this to show that comparative advantage, not absolute advantage, is the key - a country should specialize in what it can produce relatively more efficiently. Empirical studies have supported Ricardo's theory, finding nations export more of goods where they have lower relative production costs. While useful, Ricardo's model does not fully explain differences in productivity or trade's impact on factor incomes.
This document discusses international trade and balance of payments. It provides arguments for and against trade liberalization. Supporters argue that trade increases specialization and economies of scale, bringing innovation and competition. Studies show countries that liberalized trade grew faster. However, critics argue that trade can displace domestic workers and increase inequality. The document also examines the Ricardian model of comparative advantage and its limitations in making unrealistic predictions. It defines key concepts like terms of trade, protectionism, and balance of payments accounting.
There are three principal differences between how economists and noneconomists view international trade: 1) Economists see all forms of trade as equally advantageous, while noneconomists favor trading within one's own group. 2) Economists believe imports and exports are both good for the economy, while noneconomists favor exports. 3) Economists believe a country's trade balance depends on many factors like savings and investment, while noneconomists focus on competitiveness. Economists view trade as increasing efficiency through specialization and comparative advantage, while noneconomists emphasize tribal rivalries.
Law of Comparative Advantage by Dominick SalvatoreVishwasGupta45
The document discusses the theories of absolute advantage, comparative advantage, and gains from trade. It explains that according to absolute advantage, nations should trade when one has an advantage in producing one good over another. Comparative advantage expands this to say that even if a nation is worse at producing both goods, it should still specialize in the good where its disadvantage is smallest. This allows both nations to increase total production and consumption through specialization and trade. Diagrams of production possibility frontiers are used to illustrate how gains from trade arise from specialization enabled by comparative advantage.
This document discusses the theory of comparative advantage. It provides background on the theory, which was first described by Robert Torrens in 1815 and later formalized by David Ricardo. Ricardo used a numerical example to show that even if one country has an absolute advantage in all goods, both countries can still benefit from trade based on their comparative advantages. The document also outlines Ricardo's assumptions, provides his numerical example comparing Kenya and Ethiopia, and discusses limitations of the theory.
The document summarizes several theories of international trade:
1) Mercantilism focused on accumulating gold through trade surpluses. Countries aimed to export more than import through tariffs and subsidies.
2) Absolute advantage theory says countries should specialize in goods they produce most efficiently. If each country focuses on its absolute advantage, global production increases.
3) Comparative advantage theory expanded on this, showing even without an absolute advantage, specializing in your comparative advantage - where you have the lowest opportunity cost - benefits all trading partners.
4) The Heckscher-Ohlin model predicts trade patterns based on whether a country is abundant in labor or capital. Labor-abundant countries export labor
International Trade Theories document discusses several theories of international trade:
1. Mercantilism advocated accumulating wealth through exports and limiting imports using government policies.
2. Adam Smith's absolute advantage theory states that countries should specialize in goods they can produce more efficiently.
3. David Ricardo's comparative advantage theory recognizes that even without an absolute advantage, mutual trade benefits are possible if countries specialize in goods with lower opportunity costs of production.
From the textbook (Colander, David C. Macroeconomics, 7th Edition.docxMARRY7
From the textbook (Colander, David C. Macroeconomics, 7th Edition. McGraw-Hill Learning
Solution
s) read the following chapters:
16: International Trade Policy, Comparative Advantage, and Outsourcing
17: International Financial Policy
16: International Trade Policy, Comparative Advantage, and Outsourcing
One of the purest fallacies is that trade follows the fl ag. Trade follows the lowest price current. If a dealer in any colony wished to buy Union Jacks, he would order them from Britain's worst foe if he could save a sixpence.
—Andrew Carnegie
Patterns of Trade
Before I consider these issues, let's look at some numbers to get a sense of the nature and dimensions of international trade.
Increasing but Fluctuating World Trade
In 1928, total world trade was about $500 billion (in today's dollars). U.S. gross domestic product (GDP) was about $830 billion, so world trade as a percentage of U.S. GDP was almost 60 percent. In 1935, that ratio had fallen to less than 30 percent. In 1950 it was 20 percent. Then it started rising. Today it is about 250 percent, with world trade amounting to about $32 trillion. As you can see, international trade has been growing, but with significant fluctuations in that growth. Sometimes international trade has grown rapidly; at other times it has grown slowly or has even fallen.
In part, fluctuations in world trade result from fluctuations in world output. When output rises, international trade rises; when output falls, international trade falls. Fluctuations in world trade are also in part explained by trade restrictions that countries have imposed from time to time. For example, decreases in world income during the Depression of the 1930s caused a large decrease in trade, but that decrease was exacerbated by a worldwide increase in trade restrictions.
Differences in the Importance of Trade
The importance of international trade to countries' economies differs widely, as we can see in the table below, which presents the importance of the shares of exports—the value of goods and services sold abroad—and imports—the value of goods and services purchased abroad—for various countries.
Among the countries listed, the Netherlands has the highest amount of exports compared to total output; the United States has the lowest.
The Netherlands' imports are also the highest as a percentage of total output. Japan's are the lowest. The relationship between a country's imports and its exports is no coincidence. For most countries, imports and exports roughly equal one another, though in any particular year that equality can be rough indeed. For the United States in recent years, imports have generally significantly exceeded exports. But that situation can't continue forever, as I'll discuss.
Total trade figures provide us with only part of the international trade picture. We must also look at what types of goods are traded and with whom that trade is conducted.
What and with Whom the United States Trades
The majority of U.S. ...
International trade allows countries to specialize in goods they can produce efficiently and trade for goods from other countries. This benefits all countries as it allows them to consume goods they otherwise could not. While free trade has benefits, it also presents challenges as globalization has shifted many manufacturing jobs to countries with lower labor costs. As the global economy continues to integrate, governments and world leaders will need to address issues around protecting domestic industries and citizens who lose jobs and income as a result of free trade.
This document provides an outline for a chapter that discusses international trade and factor mobility theory. It begins with an opening case study on Costa Rica's economic transformation through international trade and foreign investment policies. The chapter then covers various trade theories including mercantilism, absolute advantage, comparative advantage, and theories explaining trade patterns based on country size, factor proportions, and country similarity. It also discusses how the location of production shifts over the product lifecycle and how national competitive advantages can develop and change. In concluding, the chapter discusses the relationship between international trade and the mobility of production factors like labor and capital.
- No class will be held next week on July 26th, 2010.
- The midterm exam is scheduled for August 2nd, 2010 from 8:45-10:15.
- Today's lecture slides can be found online at the provided link.
international trade theories business conceptsBojamma2
International trade theories provide explanations for why trade occurs between countries. Early theories included mercantilism, which argued that countries should encourage exports and discourage imports to accumulate gold and silver. Adam Smith proposed absolute advantage based on a country's ability to produce goods more efficiently. David Ricardo introduced comparative advantage, which recognizes specialization based on relative rather than absolute costs. Later theories examined factors like resource endowments (Heckscher-Ohlin theory) and the stages of a product's life cycle (Vernon's theory).
This document summarizes several theories of international business and trade. It discusses theories including absolute advantage, comparative advantage, factor proportions theory, product life cycle theory, and theories related to country size, similarity, and dependence. The theories aim to explain patterns of specialization and trade between countries based on factors such as resources, costs, demand, and political/cultural relationships.
International trade theories aim to explain why trade occurs between countries. Classical theories from the 18th-19th centuries focused on advantages at a country level, such as absolute advantage based on production efficiency or comparative advantage based on opportunity costs. Modern theories from the 20th century examine advantages at a firm level, such as country similarity theory that intraindustry trade increases between countries with similar consumer preferences and incomes. Overall, international trade is complex and cannot be fully explained by a single theory, as our understanding continues to evolve with globalization.
International trade theory provides several explanations for why countries engage in trade. Absolute advantage suggests countries should specialize in what they produce most efficiently. Comparative advantage argues that trade benefits both parties even if one country is more efficient in all goods. Heckscher-Ohlin asserts countries export goods intensive in their abundant factors and import goods intensive in scarce factors. New trade theory cites economies of scale and first-mover advantages as additional sources of comparative advantage. Porter's diamond identifies factor conditions, demand, related/supporting industries, and firm strategy/rivalry as determinants of national competitive advantage.
This presentation covers the fundamental concepts and models related to the study of international trade. It includes discussions on comparative advantage, international trade models, and trade policies. The aim is to provide a basic understanding of the theories of the international trade.
This document provides a summary of an economics quiz containing 30 multiple choice questions related to concepts like monopoly, perfect competition, elasticity, and costs. Some key details include:
- Questions cover topics like competitive market structures, supply and demand curves, costs of production, and pricing strategies of monopolies.
- Multiple choice answers assess understanding of how markets, costs, and prices are impacted by things like taxes, changes in inputs, and different market structures.
- The quiz questions provide diagrams and data to apply economic concepts to real world market scenarios.
This document contains 25 multiple choice questions from an economics quiz on topics related to perfect competition, monopoly, and price discrimination. The questions cover concepts like market structures, demand and supply curves, profit maximization, and price differentiation strategies. Sample questions ask about the impact of taxes on producers, conditions that define perfect competition, and factors that influence a monopolist's pricing decisions.
Similar to Chapter 6 the us in the global economy (20)
The document contains 3 demand questions about how price and income affect quantity demanded.
1) If price of apples decreases, quantity of apples demanded will increase.
2) If income increases and demand for steak increases, steak is a normal good.
3) If income increases and demand for thrift shoes decreases, thrift shoes are an inferior good.
This document discusses the concepts of price elasticity of demand and supply. It begins by introducing price elasticity and how it measures the responsiveness of quantity demanded or supplied to changes in price. It then provides formulas for calculating the price elasticity coefficient and discusses what values indicate elastic versus inelastic demand. The document also examines graphical analysis of elasticity and how it varies along a demand curve. It analyzes applications of elasticity concepts and discusses determinants of a good's price elasticity. Finally, it briefly introduces other types of elasticity like cross elasticity of demand and income elasticity of demand.
The document provides guidance for the AP Microeconomics exam, which consists of multiple choice and free response questions. The multiple choice section has 60 questions to be completed in 70 minutes, while the free response section involves 3 questions with 50 minutes for responses. For free response, it is important to show work, label graphs clearly, and answer all parts of the questions directly and efficiently. Readers will score based on a detailed rubric, so students should avoid mistakes and ensure their explanations and work can be understood. Scores on the multiple choice and free response sections will be combined and converted to a final 1-5 score.
This document provides an overview of key concepts in economics. It defines economics as concerned with efficient use of scarce resources to satisfy unlimited human wants. It describes the economic perspective as focused on scarcity, rational behavior, and marginal analysis of costs and benefits. It explains that economics uses the scientific method and theoretical and policy approaches. It distinguishes between microeconomics which examines specific units, and macroeconomics which examines the economy as a whole. The document also covers positive versus normative economics and potential pitfalls to objective economic thinking.
1. The document outlines a framework for analyzing macroeconomic problems using basic macroeconomic models.
2. It describes the typical components of analysis: a starting point, a pivotal event that causes change, and secondary and long-run effects of that event.
3. The analysis uses macroeconomic models like aggregate demand and aggregate supply to evaluate how various factors can shift curves and affect output and inflation in both the short-run and long-run.
This document discusses three issues related to exchange rates and macroeconomic policy: devaluation and revaluation of fixed exchange rates, monetary policy under floating exchange rates, and international business cycles. It explains that devaluation increases exports and revaluation decreases exports under a fixed exchange rate regime. For floating rates, it describes how monetary policy affects exchange rates and aggregate demand. It also notes how recessions can spread between countries through trade links and the impact of exchange rate regimes.
The document discusses exchange rate regimes and how governments can manage exchange rates. There are two main types of exchange rate regimes: fixed rates, where a government keeps a currency at a target rate against another, and floating rates, where the market determines the exchange rate. To maintain a fixed rate, governments can intervene in currency markets, adjust interest rates, and impose exchange controls. While fixed rates provide certainty, they require giving up monetary policy flexibility and independence.
The foreign exchange market allows currencies to be traded and provides liquidity for international trade and investment. It operates 24/5 with many factors influencing exchange rates. The equilibrium exchange rate balances supply and demand for currencies, while real exchange rates account for inflation differences between countries. Purchasing power parity estimates the exchange rate at which currencies would buy the same goods.
The document discusses balance of payments accounts, which track a country's international transactions. It has a current account for trade in goods/services and factor income, and a financial account for asset transactions. The current and financial accounts must sum to zero. Capital flows are determined by differences in investment opportunities (demand) and savings rates (supply) across countries, with funds flowing from low return to high return economies. However, two-way flows also occur for risk diversification and business strategy reasons.
Long-run economic growth is defined as a sustained rise in output over time, as opposed to short-term business cycle fluctuations. Growth depends on rising productivity, which is fostered by good policy promoting capital investment, education, technology, and stability. This is shown as an outward shift of the production possibilities curve (PPC) and a rightward shift of the long-run aggregate supply (LRAS) curve. While actual output varies in the short run, potential output increases through long-run growth.
1) Economic growth rates differ across countries due to differences in capital accumulation, human capital development, and technological progress.
2) Governments play an important role in promoting or limiting long-term growth through their influence on physical capital investment, human capital development through education, and technological progress through funding of research.
3) While natural resource scarcity and environmental issues pose challenges, most economists are optimistic that modern economies can overcome these challenges through technology, incentives to conserve resources, and market-based policies to reduce environmental impacts like carbon taxes.
The document discusses factors that affect productivity and economic growth, using examples from different regions. It examines how physical capital, human capital, technology, and their combination contribute to productivity. The aggregate production function and growth accounting are introduced to quantify these relationships. Examples from South Korea, Latin America, and Africa illustrate how political stability, education, investment, and other policies impact long-term growth rates. While Africa faces challenges, some nations have achieved increases in productivity and GDP.
The key statistic for tracking economic growth is real GDP per capita. Growth in real GDP per capita indicates a country's economic progress over time. Some countries like China and the US have grown notably, while others like Argentina and Zimbabwe have had disappointing growth. Long-run growth depends on rising productivity, which is output per worker. Productivity increases when workers have more capital, education, and technology to work with. The accumulation of innovations and adoption of new technologies are major drivers of productivity and economic growth.
Monopolistic competition is characterized by many small businesses that sell differentiated products. While products are similar, firms act independently due to product differences. In the short run, firms maximize profits where marginal cost equals marginal revenue. In the long run, easy entry forces firms to earn only normal profits as new firms enter and demand curves shift. Monopolistic competition provides variety but leads to excess capacity and inefficiencies as firms overproduce and costs are higher than under perfect competition.
This document summarizes key aspects of oligopoly market structures including characteristics, barriers to entry, concentration measures, and behavioral models. It discusses how a few large firms dominate the market through mutual interdependence. Concentration ratios and the Herfindahl index are presented as measures of market dominance. The kinked-demand, cartel, and price leadership models are overviewed to explain oligopolistic pricing. Obstacles to collusion and impacts of advertising are also addressed.
There is now broad consensus among macroeconomists on key issues:
1) Monetary policy can be used to reduce economic instability by shifting the aggregate demand curve, except in a liquidity trap.
2) Fiscal and monetary policy can limit but not reduce unemployment below the natural rate.
3) Discretionary fiscal policy should be used sparingly due to lags and risk of political business cycles, while monetary policy plays the main stabilization role.
Ben Bernanke is an American economist who served as Chairman of the Federal Reserve from 2006 to 2014. He was a professor at Princeton University and chaired the economics department there. Bernanke also served on the Council of Economic Advisers under President George W. Bush before being appointed Fed Chairman. As Chairman, he helped steer the US economy through the late-2000s financial crisis and Great Recession.
This document provides an overview of the history and evolution of macroeconomic thought. It discusses classical macroeconomics, the Keynesian revolution in response to the Great Depression, and subsequent challenges to and developments in Keynesian theory including monetarism, rational expectations, and real business cycle theory. Modern macroeconomics incorporates elements of different schools of thought with an emphasis on the role of both aggregate demand and supply factors.
The document is a study guide containing questions about macroeconomic concepts related to fiscal and monetary policy, government budgets, debt, and central banking. It tests understanding of topics like the federal budget balance, cyclically adjusted budget balance, debt-to-GDP ratio, crowding out effect, and tools of monetary policy like open market operations and the federal funds rate.
An increase in the money supply leads to higher aggregate output and prices in the short-run. However, in the long-run only prices are affected, as output returns to potential output. This is because a rise in prices induces a leftward shift of the short-run aggregate supply curve over time, returning output to potential. Therefore, monetary policy can impact real variables in the short-run but is neutral in the long-run, with only nominal aggregates like prices being permanently affected.
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2. LINKAGES
A. Several economic flows link the U.S. economy
with the economies of other nations.
B. These linkages are:
1. Goods and services flows
2. Capital and labor (resource) flows
3. Information and technology flows
4. Financial flows.
3. U.S. AND WORLD TRADE
A. Volume and Pattern:
1. Table 6.1 gives an index of the importance of
world trade to several countries.
2. Figure 6.2 reveals the growth in U.S. imports
and exports over past decades. Currently,
exports and imports are 12 percent and 17
percent of GDP, which is more than double
their importance of twenty-five years ago.
4. U.S. AND WORLD TRADE
3. The U.S. is world’s leading trading nation,
although its share has diminished from post-
World War II level of one-third of total trade to
one-eighth today.
5. DEPENDENCE
1. U.S. depends on imports for many food items
(bananas, coffee, tea, spices); raw silk,
diamonds, natural rubber, much petroleum.
2. On the export side, agriculture relies on foreign
markets for one-fourth to one-half of sales;
chemical, aircraft, auto, machine tool, coal, and
computer industries also sell major portions of
output in international markets (see Table 6-2).
6. TRADE PATTERN
1. The U.S. has a trade deficit in goods. In 1999 U.S.
imports exceeded exports of goods by $346 billion.
2. While we have a deficit in goods trade, U.S. export
of services exceeds the import of services by $81
billion.
3. The U.S. imports some of the same categories it
exports.
Specifically, automobiles, computers, chemicals, an
d semiconductors. (See Table 6 2)
4. Most U.S. trade is with industrially advanced
countries. (See Table 6 3)
7. TRADE PATTERN
5. Canada is the United States’ most important trade
partner quantitatively. Twenty four percent of U.S.
exports sold went to Canadians, who in turn
provided 20 percent of U.S. imports. (See Table 6
3)
6. The U.S. has sizable trade deficits with Japan and
China. In 1999, the U.S. trade deficit with Japan
was $75 billion. There was also a sizable trade
deficit with China. (See Table 6 3)
7. In 1999 the U.S. imported $24 billion of goods
(mainly oil) from OPEC nations, while exporting
$12 billion to those countries.
8. TRADE PATTERN
D. Financial Linkages: (International trade implies
complex financial linkages among nations.)
Trade deficits must be financed by borrowing or
earning foreign exchange, which is
accomplished by selling U.S. assets through
foreign investment in the U.S. The U.S.
borrows from citizens of other nations; the U.S.
is the world’s largest debtor nation.
9. TRADE PATTERN
E. Facilitating factors that explain the growth of
trade:
1. Transportation technology has improved over
the years.
2. Communications technology allows traders to
make deals in trade and global finance very
easily.
3. Trade barriers declined dramatically since
1940, and the trend toward free trade
continues.
10. TRADE PATTERN
F. Participants in international trade:
1. Global Perspective 6-1 shows the major
participants in world trade.
2. New participants have become important,
especially the Asian countries of Hong Kong,
Singapore, South Korea, and Taiwan. China is
also emerging as important in global trade.
Collapse of communism has led to the
emergence of former Soviet republics and
Eastern bloc countries as world trade
participants.
11. SPECIALIZATION AND
COMPARATIVE ADVANTAGE
A. The U.S. is referred to as an “open economy”
when it is placed in the global economy.
B. Adam Smith observed in 1776 that
specialization and trade increase the
productivity of a nation’s resources. His
observation related to the principle of absolute
advantage whereby a country should buy a
good from other countries if they can supply it
cheaper than we can.
12. SPECIALIZATION AND
COMPARATIVE ADVANTAGE
C. Basic principle of comparative advantage was
first observed and explained in early 1800s by
David Ricardo. This principle says that it pays
for a person or a country to specialize and
exchange even if that person or nation is more
productive than potential trading partners in all
economic activities. Specialization should take
place if there are relative cost differences in
production of different items.
13. SPECIALIZATION AND
COMPARATIVE ADVANTAGE
D. Example: A CPA can paint her house faster
and better than a painter. She earns $50 per
hour as accountant and can hire a painter for
$15 per hour. The CPA can do the painting job
in 30 hours; it takes the painter 40 hours.
Should she hire the painter? On economic
grounds, the opportunity cost is greater for the
accountant to paint her house. She is better off
to specialize in accounting rather than sacrifice
30 x $50, or $1500, to paint her house, when
she can hire the painter for 40 x $15, or $600.
14. SPECIALIZATION AND
COMPARATIVE ADVANTAGE
The accountant will gain, and the painter will also
gain because he is very inefficient in accounting. It
may take him 10 hours to prepare his tax return
which would mean 10 x $15, hours or $150, in
opportunity cost, whereas the accountant could
probably complete the forms in 2 hours for a cost
of $100. This example shows that even if a person
(the accountant) has an absolute advantage in
production of two products (painting and
accounting), it is still advantageous to specialize
and trade. The same is true for nations.
15. SPECIALIZATION AND
COMPARATIVE ADVANTAGE
E. Comparative advantage and terms of trade:
Tables 6-4 and 6-5 illustrate the principle of
comparative advantage for two countries, U.S.
and Mexico, with a simplified example. In
Mexico, the opportunity cost of 1 ton of
soybeans is giving up 4 tons of avocados. In
the U.S., the opportunity cost of 1 ton of
soybeans is 3 tons of avocados. In other
words, the comparative cost of soybeans is
less in U.S. than in Mexico when the alternative
is producing avocados. Thus the U.S. should
specialize in soybeans, and Mexico should
specialize in avocados.
16. SPECIALIZATION AND
COMPARATIVE ADVANTAGE
1. If the two nations specialize according to
comparative advantage, then to get the other
product they must trade. A nation has a
comparative advantage in some product when it
can produce that product at a lower domestic
opportunity cost than can a potential trading
partner.
2. Table 6-6 summarizes which nation has a
comparative advantage in each product.
3. The rate of exchange of these two products will
be determined through negotiation; the outcome
is called the terms of trade.
17. SPECIALIZATION AND
COMPARATIVE ADVANTAGE
4. The terms of trade will be limited by the relative
costs of production within each country. The U.S.
will not forgo more than 1 ton of soybeans to get
3 tons of avocados and Mexico will not give up
more than 4 tons of avocados for 1 ton of
soybeans.
5. Somewhere between these limits, trade is
possible. In the text example, the terms of trade
are assumed to be 3.5 tons of avocados for each
ton of soybeans. Americans would specialize in
soybeans only if they could obtain more than 3
tons of avocados for 1 ton of soybeans by trading
with Mexico.
18. GAINS FROM SPECIALIZATION
AND TRADE
1. Table 6-7, column 1, shows the optimal outputs
for Mexico and U.S. in soybeans and avocados
before specialization and trade.
2. Column 2 of Table 6-7 shows the amount each
country produces when it specializes.
3. Column 3 of Table 6-7 shows quantities in each
country after trade takes place at the rate of
1S = 3.5A
1. Mexico will give up 35 tons of avocados for 10
tons of U.S. soybeans.
19. GAINS FROM SPECIALIZATION
AND TRADE
5. Now each country will have more than they had
originally: Mexico now has 25 tons of
avocados left plus 10 tons of soybeans. U.S.
now has 35 tons of avocados and keeps 20
tons of soybeans. Mexico has gained 1 ton of
each; U.S. has gained 2 tons of avocados and
1 ton of soybeans, and these gains have
occurred using the same resources as before
specialization.
20. GAINS FROM SPECIALIZATION
AND TRADE
6. This example illustrates that specialization and
trade can improve overall output even when
one country (U.S.) can produce more of both
items compared to the other without trade.
Specialization and trade have the same effect
as an increase in resources or technological
progress.
STOP AND DO Key Questions 4 and 5
22. WHAT IS A FOREX?
A. In a foreign exchange market,
various national currencies are
exchanged for one another so that
international trade can take place.
Germans want euros, Mexicans want
pesos, and the Japanese want yen
when they sell their products.
23. WHAT DOES A FOREX DO?
Two points require emphasis with respect to these
markets.
1. Real-world foreign exchange markets are
competitive, with large numbers of buyers and
sellers dealing with a standardized product, the
currency of some country.
24. WHAT DOES A FOREX DO?
2. Exchange rates link domestic (one country’s)
prices with all foreign prices. They enable you
to translate the price of foreign products into
dollars. For example, if the dollar/yen
exchange rate is 1 cent/per yen, a Sony T.V. set
priced at ¥20,000 will cost an American $200 =
(20,000 x .01).
25. EXAMPLE IN THE
TEXTBOOK
C. The dollar-yen exchange market is depicted in
Figure 6.3. The demand for yen and the supply
of yen curve will establish the equilibrium dollar
price of yen.
26. Appreciation and Depreciation
1. If the demand for yen rises, the dollar price of
yen rises. That means the dollar depreciates
relative to the yen. This could happen for many
reasons including an increase in U.S. incomes
that enables Americans to buy more Japanese
goods, or an increase in preference for
Japanese products. The result is that
Japanese goods would become more
expensive to Americans and U.S. products
would become less expensive to us.
27. Appreciation and Depreciation
2. If the opposite occurred and Japanese incomes
increased more than U.S. incomes and/or
Japanese preferences for U.S. products
increased, then the dollar would appreciate
relative to the yen as the yen supply increased.
Americans will purchase a greater quantity of
Japanese products because they have become
less expensive in dollar terms.
28. GOVERNMENT AND
TRADE impediments are sometimes enacted
Several trade
by governments.
1. Protective tariffs are excise taxes or duties on
imported goods. Governments enact these
tariffs to protect domestic producers by making
foreign goods more expensive.
2. Import quotas are maximum limits on the
number or total value of specific imports. Once
quotas are filled, no more imports are allowed
into the country.
29. GOVERNMENT AND
TRADE
3. Nontariff barriers include licensing
requirements, unreasonable standards, and
unnecessary bureaucratic “red tape.”
4. Governments have used export subsidies to
promote the sale of products aboard.
30. WHY DO GOVERNMENTS
ENACT TRADE BARRIERS?
1. They don’t understand the benefits from
international trade and see only the damage in
certain industries that can’t compete
successfully with imports.
31. WHY DO GOVERNMENTS
ENACT TRADE BARRIERS?
2. Political considerations are important because
consumers don’t see the effects of a tariff or
quota directly, but they do see the impact of
import competition on some workers. Also, the
benefits of free trade tend to be spread among
all consumers, but the benefits of a protective
policy are realized almost immediately in the
short run by the affected industry may have a
large and vocal stake in the outcome.
32. WHO IS HURT BY TRADE
BARRIERS?
C. Trade barriers hurt American consumers who
must pay higher than world prices. Interference
with international trade through protective tariffs
and quotas is shown to cost society more than
the benefits that are received by the protected
firms and workers.
33. LET’S PRACTICE!
Do Key Questions 6 and 7 from page 109;
answer in your notebook.
35. THE SMOOT-HAWLEY
TARIFF ACT
A. Trade barriers can cause a “trade war,” in
which all nations retaliate with trade barriers of
their own. The Smoot-Hawley Tariff Act of 1930
was a classic example of this. It prompted
other nations to increase tariffs and global trade
fell as well as U.S. output.
36. THE RECIPROCAL AGREEMENTS
ACT
B. Reciprocal Trade Agreements Act had the goal
of reducing tariffs.
1. It gave the President the power to negotiate
reductions up to 50 percent if the trading
partner also reduced its tariffs.
2. This act included “most-favored-nation”
clauses in agreements so other nations also
benefit when negotiations succeeded with one
particular country. For example, if the U.S.
negotiated a reduction in tariffs with France, to
lower American tariffs on French imports, the
imports of other nations having most favored
nation status, say, Sweden would also be
reduced.
37. THE GENERAL AGREEMENT OF TARIFFS
AND TRADE (GATT)
C. The General Agreement of Tariffs and Trade:
1. In 1947 after WWII, the U.S. signed an
agreement to negotiate reductions on a
multilateral basis. Twenty-three nations
originally signed, but now 128 nations belong to
GATT.
2. The latest round of GATT negotiations was the
eighth set of negotiations. It began in Uruguay
in 1986 and concluded at the end of 1993. The
agreement was passed by Congress in the fall
of 1994, went into effect in 1995, and was
phased in through 2005. Its major provisions
include the following:
38. TRADE AGREEMENTS
a. Tariff reductions will average 33 percent.
b. Services are included in the treaty’s trade rules.
c. Quotas on textiles and apparel imports will be
replaced by tariffs and these, too, will be
eliminated gradually.
d. Agriculture will also be affected with members
agreeing to cut subsidies to agriculture and
quotas on agricultural imports.
39. TRADE AGREEMENTS
e. Intellectual property will be protected by
international patent, trademark, and copyright
agreements.
f. When fully implemented, experts estimate the
GATT agreement will boost world GDP by $6
trillion or 8 percent, and U.S. consumers will
save about $30 billion each year.
40. THE WORLD TRADE ORGANIZATION
D. World Trade Organization (WTO):
1. The Uruguay Round of the GATT established
the WTO as the GATT’s successor, which
replaced it.
2. The WTO oversees trade agreements and
rules on trade disputes, acting as a supervisor
and liberalizing international trade.
3. The organization deals with regulation of trade
between participating countries; it provides a
framework for negotiating and formalizing trade
agreements, and a dispute resolution process
aimed at enforcing participants' adherence to
WTO agreements.
41. THE WORLD TRADE ORGANIZATION
4. The organization is currently in a trade
negotiation called the Doha Development
Agenda (or Doha Round), which was launched
in 2001 to enhance equitable participation of
poorer countries which represent a majority of
the world's population.
5. The negotiations have been intense and
agreement has not been reached;
disagreements still continue over several key
areas including agriculture subsidies.
6. WTO has 157 members, representing more
than 97% of the world's population.
42. ARGUMENTS FOR AND AGAINST THE
WORLD TRADE ORGANIZATION
4. Critics of the WTO are concerned that the rules
crafted to expand trade and investment enables
firms to circumvent national laws that protect
workers and the environment.
5. Proponents argue promotion of free trade will
raise output and incomes and that the higher
standards of living will likely result in more
protections for workers and the environment.
43. THE EUROPEAN UNION
E. European Union (EU):
1. In many regions of the world, countries have
formed free-trade zones to reduce tariffs.
2. The EU was formed in 1958 as the Common
Market.
3. The EU was created in the aftermath of the
second world war. The first steps were to foster
economic cooperation: countries that trade with
one another are economically interdependent
and will thus avoid conflict.
44. THE EUROPEAN UNION
4. Since then, the union has developed into a
huge single market with the euro as its
common currency. What began as a purely
economic union has evolved into an
organization spanning all areas, from
development aid to environmental policy.
5. The EU is a unique economic and political
partnership between 27 European countries.
45. MEMBERS OF THE EUROPEAN
UNION
1. Austria (since 1995-01-01) (EUR)
2. Belgium (EUR)
3. Bulgaria (since 2007-01-01)
4. Cyprus (Greek part) (since 2004-05-01) (EUR: 2008-01-01)
5. Czech Republic (since 2004-05-01)
6. Denmark
7. Estonia (since 2004-05-01)
8. Finland (since 1995-01-01) (EUR)
9. France (EUR)
10. Germany (EUR)
11. Greece (EUR)
12. Hungary (since 2004-05-01)
13. Ireland (EUR)
14. Italy (EUR)
46. MEMBERS OF THE EUROPEAN
UNION
15. Latvia (since 2004-05-01)
16. Lithuania (since 2004-05-01)
17. Luxembourg (EUR)
18. Malta (since 2004-05-01) (EUR: 2008-01-01)
19. Netherlands (EUR)
20. Poland (since 2004-05-01)
21. Portugal (EUR)
22. Romania (since 2007-01-01)
23. Slovakia (since 2004-05-01) (EUR: 2009-01-01)
24. Slovenia (since 2004-05-01) (EUR)
25. Spain (EUR)
26. Sweden (since 1995-01-01)
27. United Kingdom of Great Britain and Northern Ireland
47. THE EUROPEAN UNION
6. The EU has delivered half a century of peace,
stability, and prosperity, helped raise living
standards, launched a single European
currency, and is progressively building a single
Europe-wide market in which people, goods,
services, and capital move among Member
States as freely as within one country.
48. THE EUROPEAN UNION
7. The EU actively promotes human rights and
democracy and has the most ambitious
emission reduction targets for fighting climate
change in the world. Thanks to the abolition of
border controls between EU countries, it is now
possible for people to travel freely within most
of the EU. It has also become much easier to
live and work in another EU country.
49. THE EURO
F. The Euro:
1. The euro is a currency established by the EU
that is now being used by 17 of the 27 EU
nations.
2. Starting in 1999, the euro was first used as
electronic payments for credit card purchases
and transfer of funds among banks, while each
country continued to use their currency for cash
transactions.
3. By July 2002, only the euro was accepted for
payments in the EU countries that adopted the
currency.
50. WHO USES THE EURO? SINCE
WHEN?
1999 Belgium, Germany, Ireland, Spain, France,
Italy, Luxembourg, the Netherlands, Austria,
Portugal and Finland
2001 Greece
2002 Introduction of euro banknotes and coins
2007 Slovenia
2008 Cyprus, Malta
2009 Slovakia
2011 Estonia
51. NAFTA
G. North American Free Trade Agreement (NAFTA):
1. This free-trade zone was established in 1993
among Canada, U.S. and Mexico with about the
same combined output as EU, but a larger
geographical area.
2. Free trade with Mexico was controversial
because critics fear a loss of American jobs as
firms can move to Mexico more easily. Also, they
fear Japanese and South Korean firms will build
plants there and import goods duty-free to U.S.
3. The increased trade has increased domestic
employment, reduced unemployment, and
increased the standard of living in all three
countries.
52. NAFTA
2. Free trade with Mexico was controversial
because critics fear a loss of American jobs as
firms can move to Mexico more easily. Also,
they fear Japanese and South Korean firms will
build plants there and import goods duty-free to
U.S.
3. The increased trade has increased domestic
employment, reduced unemployment, and
increased the standard of living in all three
countries.
53. INCREASED GLOBAL
COMPETITION
A. Although imports of many products have
decreased the share of American firms in the
U.S. market, hundreds of U.S. firms have
prospered in the global market.
B. Although some domestic producers will get hurt
and their workers will have to find
employment elsewhere, freer trade benefits the
consumer and society.