Introduction(1) - ECO 364 - Topic 1 Introduction Kunal...

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Unformatted text preview: ECO 364 - Topic 1 Introduction Kunal Dasgupta Dasgupta (UofT) Introduction 1 / 18 Motivation What is trade? De nition The act of buying and selling goods and services. Oxford Dictionary Trade involves two economic entities - individuals, corporations, governments, etc. When the traded good or service crosses an international boundary, we have international trade. Buying and selling are also refereed to as importing and exporting respectively. Dasgupta (UofT) Introduction 2 / 18 Motivation Why study trade? In 2005, the total value of exports of goods and services were $10.2 trillion and $2.4 trillion respectively. In the last two decades, world trade has grown at a faster rate than world GDP. The magnitude of world trade and its phenomenal growth over the last fty years suggests that despite all the costs, trade continues to generate net gains for countries. One of the most important insights in all of international economics is that there are gains from trade- that is, when countries sell goods and services to each other, this exchange is almost always to their mutual bene t. Dasgupta (UofT) Introduction 3 / 18 Motivation Why study trade? How do countries gain from trade? A technology is a blueprint that transforms inputs into output. International trade is just like a technology - allowing a country to transform a set of goods and services (exports) into another set of goods and service (imports). In an open economy, a country is not constrained to use its own technology to produce goods - it has access to the technologies of all the countries that participate in international trade....
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This note was uploaded on 02/24/2012 for the course ECO eco364 taught by Professor Dasgupta during the Spring '12 term at University of Toronto- Toronto.

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Introduction(1) - ECO 364 - Topic 1 Introduction Kunal...

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