Economics 353 lecture 6_1

Economics 353 lecture 6_1 - Eco 353 Lecture 6 Foreign Trade...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Eco 353 Lecture 6 Foreign Trade and Commercial Policy
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Please read Please read: http://online.wsj.com/article/SB1000142405 EU Leaders Agree on Greece Support
Background image of page 2
Greece Why does the Greek government need support? What has happened to the interest rate of Greek government bonds? Why has this happened? What role do credit default swaps (CDS) play here?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
What if …? What would have happened to the new US Government in the 1830s, if it behaved like the Greek government has behaved? Who would have bailed us out? Could we have become like Greece today?
Background image of page 4
Trade in the new nation Trade was crucial was a number of reasons. Trade and capital imports were closely related to money supply growth, as we discussed. Trade allowed us to exercise our comparative advantage Trade allowed us to adopt new technologies
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Comparative Advantage If the ratio of costs of production in two countries differs, then they can both gain from trade even if one country has an absolute cost advantage.
Background image of page 6
Comparative Advantage Example, It cost 10 units of A good to produce 1 unit of I good in US. It cost 5 units of A good to produce 1 unit of I good in UK. If UK shipped 1 unit of I goods to US, the US could return 7 units of A goods and both countries would be better off.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Comparative Advantage Suppose industrial goods (I) are relatively expensive in the US (in the early 1800’s). That means that 1 unit of I costs a lot in terms of agricultural goods (A) Suppose each unit of I cost 10 units of A to produce. In other words, the US can change its production mix, but for each I it has to give up 10 A.
Background image of page 8
Comparative Advantage Suppose industrial goods (I) are relatively cheap in the UK (in the early 1800’s). That means that 1 unit of I costs a little in
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 36

Economics 353 lecture 6_1 - Eco 353 Lecture 6 Foreign Trade...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online