LN28 - Consider two countries USA and Brazil Computers...

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Lecture 28: Trade Figures and Trade Facts USA & THE GLOBAL ECONOMY Before we start discussing trade, let’s just review some basic facts about the world. There are many strong emotions about trade, whether good or bad and (intentionally or not) there are some misunderstandings about some of the basic trade data. Interdependence USA and imports: USA and exports: World’s Top Exporters, 2008 (US $) Countries from which the USA imports (percent of value), 2008 Countries to which the USA exports (percent of value), 2008
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Econ 1102-001, Lecture 28 Page 2 of 3 Most important trading partner: So, how important is trade? Exports as a percentage of GDP Exports per capita The Economic Basis for Trade Trade happens. Why? Reasons countries trade: 1. 2. 3. Production Possibilities and Trade Suppose 2 products: Computers, Coffee
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Unformatted text preview: Consider two countries, USA and Brazil Computers Coffee USA 20 min/computer 10 min/pound Brazil 1 hr/computer 15 min/pound Amt produced in 8 hours Computers Coffee USA Brazil Econ 1102-001, Lecture 28 Page 3 of 3 USA production possibilities Brazil production possibilities USA A (8,0) B (4,4) C (0,8) Brazil A (8,0) B (4,4) C (0,8) Computers Computers Coffee Coffee Let’s graph the PPF USA PPF Brazil PPF Can these two countries increase their utility by trading? People who don’t really understand economics would look at the table and say: “Look, the USA is better at building computers, and it’s better at growing coffee. The USA is ABSOLUTELY better than Brazil at producing goods, so there is NO benefit to the USA from trading with Brazil.” We will see soon that this is not true....
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LN28 - Consider two countries USA and Brazil Computers...

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