Notes Jan11 - At p = 50, China does not want to import or...

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EC340 Sec. 3 Professor Matusz 1/11/11 United States Connected By Rest of the World - Prices of Goods - Wages - Interest Rates - Employment - Production of Goods/Services - National Income - Investment Spending - Trades in Goods and Services - Financial Flows - Labor Migration - Multinational Firms - Prices of Goods - Wages - Interest Rates - Employment - Production of Goods/Services - National Income - Investment Spending Main objective of class is to analyze the cause and consequences of trade. Simple model of international trade using just ordinary supply & demand - Think of the market for a single good - At p = 100 there is a shortage of helmets in the U.S.
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At p = 150, U.S. quantity of imports demanded is 0.
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Unformatted text preview: At p = 50, China does not want to import or export any helmets. At 50 < p < 150, there is an equilibrium quantity at which China wants to export and U.S. wants to import. Trade creates winners and losers. In the above example, winners are American consumers and Chinese producers while the losers are Chinese consumers and American producers. Can we quantify the gains and losses? Why are helmets expensive in the U.S. and cheap in China (in absence of trade)? To be shown:-The gains and losses of trade can be quantified in dollars and cents-Benefits outweigh the costs for each country...
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This note was uploaded on 10/04/2011 for the course EC 340 taught by Professor Ballie during the Spring '10 term at Michigan State University.

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Notes Jan11 - At p = 50, China does not want to import or...

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