2008 - 02/04/2008 Why Do Nations Trade? 1. No national...

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02/04/2008 Why Do Nations Trade? 1. No national economy can produce all the goods and services its people need or want. 2. Both trading nations benefit 3. Novelty – Coca Cola in Guangzhou; Tsingtao Dark beer at Elephant Bar Absolute Advantage 1. A nation is the only source of a particular product; Comparative Advantage 1. Uses relative cost-output (productivity rations between 2 countries 2. Asks whether diversification OR specialization and trade has higher payoffs. 3. Use this approach vs. Opportunity cost model. Measuring Trade 1. Balance of Trade – subtract the value of a country’s imports from the value of its exports 2. Balance of Payments – the difference, over a period of time, between the total flow of money coming into a country and the total flow of money going out. Balance of Trade 1. Trade Surplus (Favorable Balance) – A nation sells more than it buys 2. Trade Deficit (Unfavorable Balance) – A nation buys more than it sells. Ways to Go Global
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This note was uploaded on 05/14/2008 for the course BUS 10 taught by Professor Brien during the Fall '08 term at Foothill College.

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2008 - 02/04/2008 Why Do Nations Trade? 1. No national...

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