Educated mothers have a multiplier impact on future

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– Educated mothers have a multiplier impact on future generations– Education can break the vicious cycle of poverty and inadequate schooling for womenInternational Trade-Larger countries (in terms of size) tend to be LESSOPEN (in terms of larger share of exports in GDP) -Smallercountries and developing countries tend to be MORE OPEN than developed economiesGlobalization-Process by which economies in the world become increasingly integratedBalance of Payments = (Current Account) + (Capital Account)Current Account = (Exports) – (Imports)Capital Account = (Loans + Investment) – (Debt repayments) -East Asian countries (China, South Korea, Taiwan) have had success in manufacturing exports-Less developed countries:oDependent on primary products(cofee, oil, minerals) whose prices are falling/unstableoSufer from balance of payment instability, imports need to financed oIntentionally run current account deficitto manipulate exchange rate
Elasticity of Demand∆Qd∆IncomeWhen elasticity of demand is LOWFall in the price of primary products More exports needed to get same value of previous exportsPriceElasticity of Demand∆Qd∆PriceWhen price elasticity of demand is LOWA shift in the demand/supply curve results in:-Large price flux -Export earning instability If incomein the importing country rises by 1%,the quantity demandedof product X will rise by less than 1%Comparative Advantage Production of good at a lower opportunity cost than any of the alternative goods that could be producedoCountries specialize in goods which they have an comparative advantageoOpportunity costs determine relative costsAbsolute AdvantageWhen a person / country can produce a given good more cheaplyTheory of Comparative AdvantageTrade is beneficial because countries can produce goods at different relativecostsoNot efficient to produce every good you need on your ownoExchange part of your production in exchange for others produced goods (trade)oSpecializing & trading lowers cost per unit producedFactor Endowment Trade Theory-Trade is beneficial because: Countries have different endowments in production factors AKA They are better ‘equipped’ to produce certain goods-Countries specialize towards capital or labor intensive products and trade; producing the good they can produce more cheaply-Countries well-endowed with capitalwill export capital-intensive products-Countries well-endowed with laborwill import capital-intensive productsProposition 1-Diferent products require diferent combo’s of production factors (capital, labor, capital / labor ratio to produce 1 unit of output) Proposition 2-Countries have diferent endowments in production factors (labour force, capital stock per worker) Commodity Terms of Trade = Export priceImport price-Exports provide source of income which can be used to finance imports
YEARPrice ImportPrice ExportCommodity Terms of Trade1970100100120001251500.83The country needs to:-Export more in 2000 in order to be able to buy the same amount of imports as

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