macro_lecture09-04 - Comparative Advantage(David...

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Aplia: 1 st assignment due Thursday 9/6 at 11 pm Today: I. Trade and the gains from trade 1- Historical perspective a. Mercantilism b. Absolute advantage c. Comparative advantage II. Tariffs and non tariff barriers III. Trading Pacts Nafta E.U Others IV. Application of comparative advantage Trade Historical perspective -evolution of key ideas Mercantilism Max exports Minimum inmports Absolute Advantage (Adam Smith) Trade based on absolute cost (productivity) advantage
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Unformatted text preview: Comparative Advantage (David Ricardo)-Trade based on relative cost advantage-Look at the (internal) opportunity cost within a country-Ex: US and Canada No Trade (isolation)----produce---consumption Trade = produce, trade, consumption Tariffs: Taxes on imported goods EU (25 countries)-single currency Euro-single bank European Central Bank (ECB)...
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