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COMM1800chapter4

COMM1800chapter4 - Global markets Ch 4 The US is the...

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Global markets- Ch 4 The US is the largest importing nation in the world (Imports most of its oil from Canada, then Saudi). China is the largest exporting nation in the world. We trade with other nations because no one nation can product all its needs. Some countries have a competitive advantage in natural resources or technology so it becomes more effective for them to produce that and import other goods. This is a mutually beneficial exchange. (The US has a comparative advantage over China for software but China has a CA over the US for clothing; South Africa has an absolute advantage in diamond production) Free trade is the movement of goods and services among nations without political or economic barriers. Comparative advantage theory states that a country should sell those goods to countries which it can produce most effectively and import those goods which it cannot product effectively. Absolute advantage is when one country has a monopoly on a good or is able to produce it more effectively than all other countries.
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