Chapter 2 - Chapter 2 Inside Trade Theory I...

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Chapter 2- Inside Trade Theory I. Merchantilism (16 th -18 th Century) Merchant Capitalism a. Maximizing trade surpluses: exports of goods and services exceed the imports b. Modern day china turns trade surpluses c. Foll of rome to the ottoman empire Instanbul became center of trade (power of countries was defined by how much gold a country had) d. Mindset: every trade is looked at as a game of winners and losers and each was trying to win II. Theory of Absolute advantage a. Adam smith was the first to use theory as justification for free trade i. Whe you trade you are better off then when you do not trade ii. Strive for more gold and the colonization and the strive for more trade b. Industrial Revolution i. Faster fore efficient production ii. Production increases city population iii. Britian began the I.R. c. Water Pool 1814, Congress of Vienna 1815 d. “Wealth of Nations” by adam smith 1776 i. no longer about the gold it is the production capacity of a country that measures its wealth (GDP) ii. resources- production- wealth
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