Chpt_5r1 - Chpt 5 Chapter Five International Trade Theory...

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Chpt 5
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Chapter Five International Trade Theory
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Overview of Trade Theory Free Trade occurs when a government does not attempt to influence, through quotas or duties, what its citizens can buy from another country or what they can produce and sell to another country The Benefits of Trade allow a country to specialize in the manufacture and
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Trade Theory-Overview The Pattern of International Trade displays patterns that are easy to understand (Saudi Arabia/oil or China/crawfish). Others are not so easy to understand (Japan and cars) The history of Trade Theory and government involvement presents a mixed case for the role of government
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Mercantilism: Mid-16th Century A nation’s wealth depends on accumulated treasure Gold and silver are the currency of trade Theory says you should have a trade surplus Maximize export through subsidies Minimize imports through tariffs and quotas Flaw: “zero-sum game”
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Mercantilism-Zero-Sum Game In 1752, David Hume pointed out that:
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Chpt_5r1 - Chpt 5 Chapter Five International Trade Theory...

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