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Unformatted text preview: international trade and the world economic 20:14 Gdp: 27 countries increased since 2004, in 2009. Highest Afghanistan Trade in the world economy Trade grows faster than GDP Us exports to china = us gdp because manufactured in us Countries are connected with each other by international trade, Germany us and china control exports and imports Theory of international trade: comparative advantage: Absolute advantage: be able to export products, you have to be more productive in producing the products. Example, US has absolute advantage in drugs (more drugs per hour Both countries can gain from trade (increase total production and consumption) Both countries can increase consumption b specializing in product they have absolute advantage Comparative advantage: assume china is only ½ as productive, it now has absolute advantage in nothing! Is there still gain from trade, yes because china has comparative advantage in nothing!...
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- Fall '11
- Comparative Advantage