Macroeconomics, Week 2, Chapter 3
Macroeconomics, Week 2, Chapter 3 12906
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This 1 page Class Notes was uploaded by Naya Rhodes on Friday September 9, 2016. The Class Notes belongs to 12906 at Kent State University taught by Laurie Skul in Fall 2016. Since its upload, it has received 5 views. For similar materials see Principles of Macroeconomics in Economics at Kent State University.
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Date Created: 09/09/16
Macroeconomics Chapter3:InternationalTrade -Whenacountryhasaproductivityedgeoverothersthisiscalledanabsoluteadvantage.Whentwocountrieshavean absoluteadvantageindifferentgoods,theycanbothbenefitbyspecializingintheproductinwhichtheyhavetheabsolute advantageandthentrading. Whenacountry’scostofproduction,measuredinopportunitycost,islowestthisiscalledcomparativeadvantage.Sameas absoluteadvantage,countriesbenefitbyspecializingintheproductinwhichtheyhaveacomparativeadvantageandthen trading. -Intra-industrytradeoccurswhenacountryimportsandexportsthesamegoodsatthesametime.Thegainsfromtrade betweensimilareconomiescomefromthespecializedlearningofparticulartasksandfromeconomiesofscale. Specializationintheworkeconomyiscalledsplittingupthevaluechain. -Internationaltradeisverybeneficialforsmallercountriesbutcanbedifficulttomeasure.Interpersonal,inter-community, andinterstatetradealsooffereconomicgains.Internationaltradecausesdisruptionandcontroversysinceitinvolvesover $20trillionworthofgoodsandservicesaroundtheworld.
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