ECO3041 - Ch 17 Int'l Trade

ECO3041 - Ch 17 Int'l Trade - FIU Department of Economics...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
FIU Department of Economics Chapter 17 Notes International Trade Prof. Dacal
Background image of page 1

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

View Full DocumentRight Arrow Icon
Chapter 17 Notes I. U.S. Trade Patterns Imports Imports are goods and services purchased from foreign sources. We buy over 2 trillion worth of goods and services to the rest of the world. Exports Exports are goods and services sold to foreign buyers. We sell over 1 trillion worth of goods and services to the rest of the world. Trade Balance The trade balances is computed by: Trade balance = Exports – Imports Trade deficit is the amount by which the value of imports exceeds the value of exports in a given time period. In merchandises the US has a large deficit due to oil and auto imports. In services it enjoys a modest surplus. Trade surplus is the amount by which the value of exports exceeds the value of imports in a given time period. On a global scale, imports must equal export. For every dollar going to deficit for a given country, there must be a surplus of equal amount globally. 2
Background image of page 2
Chapter 17 Notes Einstein’s law of relativity can be applied in the context of global trade, For every action there is an equal and opposite reaction. In the context of global trade, for every dollar in imported there has to be one dollar in export With respect to the US trade deficit, in the long run the US dollar will become too weak or foreign investors will not lend to us. II. Motivation to Trade The gain from trade will be increased world output and thus a higher standard of living in the countries that participate in trade. Specialization, in the context of international trade, is “a method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas. Many countries specialize in producing the goods and services” 1 were the country has competitive advantage. Production and Consumption without trade Production possibility is the alternative combinations of goods and services that could be produced in a given time period with all available resources and technology. Look at page 361 graphs
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/22/2012 for the course ECO 3041 taught by Professor Dacal during the Fall '11 term at FIU.

Page1 / 8

ECO3041 - Ch 17 Int'l Trade - FIU Department of Economics...

This preview shows document pages 1 - 4. Sign up to view the full document.

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