160a - 160a 1 Determining the pattern of International...

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160a 1. Determining the pattern of International Trade a. Thursday- wamu bought by JP for 1.9 billion i. Wamu has assets of $307 billion in debt securities, but not sure if they will pay it back. ii. JP morgan is writing the values of the accounts receivable by 10% aka 31 billion. b. Wachoiva bought out by Citi for 2.2 billion c. Bail out failed. 700b. d. Senate will work on the bailout instead of the HR. 2. Ch 2 second lecture a. Ex. w/snow boards. i. US imports 1. top 12 countries to import from a. China i. 18 million imported ii. $51 each b. Austria i. 18 million imported ii. $95 each c. Canada i. 9 million imported ii. $74 d. Mexico i. 5 million imported ii. $9 each, unfinished maybe. e. France f. Poland g. Tunisia- French colony i. $163 each, wholesale, some finishing touches h. Bulgaria i. Germany i. 1 million imported ii. $119 each vs china at $51 j. Switzerland i. 0.2 million imported 3. Reasons for trade a. Proximity b. The closer countries are the lower the costs of transportation i. Ex. the largest trading partner of most Euro countries is another Euro country c. Proximity often leads to countries joining into a free trade area i. Ex. NAFTA and EU 4. Resources a. A country can have resources that give it an edge int eh production of certain goods
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i. A country with a lot of snow may be very good at producing snowboards b. Geography includes natural resources, land labor and capital. c. Resources are also factgors of production, the land labor and capital used to produce goods and services d. We will study international trade due to resources differences 5. Outsourcing, (cheap labor, the reason why we buy from Mexico/China) a. Some countries produce unfinished products that are then processed in another countries i. Unfinished snowboards in Mexico b. Trade in unginished goods is an example of outsourcing, when production activities spread across several counties and trade semi finished products between them. i. Why do we trade w/Germany, they produce high quality products 1. it has the best technology and has an absolute advantage in producing quality goods ii. Why do we trade w/ China? 1. cheap labor, but why is it cheap? a. population b. so- so level of technology i. no doubt Germany is better at it. ii. But even though the technology isn’t that good, the wages makes up for it w/price. c. This is a comparative advantage in producing snowboards. 6. Ricardian Model a. To develop the idea of comparative advantage, we will use the Ricardian model of Trade i. The model was devised to respond to the mercantilist idea that exports are good and imports are bad ii. David Ricardo found this was not true and considered an ex where trade between two counties was balanced We assume balanced trade. 1.
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160a - 160a 1 Determining the pattern of International...

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