The GATT was
an international treaty governing trade
What trends promote trade?
historical ties, linguistic/cultural affinity, sizes of economies, mutual membership in trade agreements
The gravity model claim "size matters" asserts that there is a strong empirical relationship between the size of a country's economy and
the volume of its imports and exports
According to the gravity? model, a characteristic that tends to affect the probability of trade existing between any two countries is
the distance between them
In the? pre-World War I? period, the United Kingdom imported primarily
primary products including agricultural.
Over the past forty years the composition of? developing-country exports has
undergone a dramatic shift from primary products to manufactures.
A century ago each? country's exports were shaped largely by
climate and natural resources.
The sources of modern trade are largely rooted in
country differences in human and? human-created resources.
In? 2013, what percent of all world consumption? (private and? public, including real? investment) was? imported?
30%
Canada and Australia are? (mainly) English-speaking countries with populations that are not too different in size? (Canada's is 60 percent? larger). But Canadian trade is twice as? large, relative to? GDP, as? Australia's.
Why should this be the? case?
1. Canada is close to a major economy
2. Transportation costs for imports and exports are higher in Australia because the distance goods must travel.
Using the gravity? model, explain why East Asian countries do an increasing share of their trade with each other.
Since the GDP of East Asian countries has? grown, the product of any two East Asian? countries' GDP is now larger. And as the gravity model? predicts, the trade volume between them has grown.
In the? present, most of the exports from China are in
manufactured goods.
The current process of increasing economic integration among national? economies, better known as? globalization,
is the? world's second wave of such integration.
Since World War II? (the early? 1950s), the proportion of most? countries' production being used in some other country
increased
In the current? Post-Industrial economy, international trade in services
is relatively small
In the? pre-World War I? period, the United Kingdom imported primarily
primary products including agriculture
Over the past forty years the composition of? developing-country exports has
shifted from primary products to manufacturers
The coordination of international macroeconomic policies among sovereign nations
has only recently been advocated by economists.
International capital markets
1. have grown significantly since the 1960's
2. link the capital markets of individual countries
According to international trade theory, when countries engage in trade it
is usually beneficial to both countries
Cost-benefit analysis of international trade
focuses attention on conflicts of interest within countries
Since the end of WWII, have there been concerns among developed countries regarding the amount of trade?
Yes, by a largely political movement of protectionists and new ideologists.
International economics can be divided into two broad? subfields:
international trade and international money
Transactions that involve the physical movement of goods or a tangible commitment of resources are the domain of
international trade analysis
In the real? world, the dividing line between trade and monetary issues is
neither simple nor clear
What is does the slope of a PPF convey
The opportunity cost
In the? multi-good, single-factor Ricardian? model, the decisive factor in determining which country will produce a particular good is
the identification of the lowest cost producer
In the? multi-good, single-factor Ricardian model the equilibrium relative wage of? Home's workers is determined by the
relative demand and relative supply of labor.
The relative demand for labor function is shaped as
a step function
The Ricardian model of international trade makes predictions about actual international trade flows that
are supported with qualification by the empirical evidence.
The degree of specialization predicted by the basic Ricardian model
is more extreme than in the real world
Countries will tend to export those goods in which
their relative productivity is high
Trade gives the possibility of
a mutually beneficial rearrangement of world production
The potential for gains from the rearrangement of production among countries is due to
differing opportunity costs
A country has a comparative advantage in producing a good if
its opportunity cost of producing that good is lower than elsewhere.
Like the simple Ricardian? model, the specific factors model
assumes that a country that produces two goods and can allocate its labor supply between two sectors
As more labor is? used, holding capital? constant,
the marginal product of labor decreases
In each sector of a specific factors? economy, profit-maximizing employers will demand labor up to the point where
the marginal product of labor times the price of the product equals the wage rate
For trade to take? place, a country must face a world relative price that is
different from the relative price that would prevail in the absence of trade.
When opening up to? trade, an economy
exports the good with the higher relative price and imports the good with the lower relative price
Trade has ambiguous effects on
mobile factors
The fundamental reason why trade potentially benefits a country is that it
Expands the economy's choices
Within each country that opens itself to international? trade,
some factor owners gain, while other factor owners lose
Movement of labor from a Foreign country to the domestic? (Home) economy
increases the marginal product of labor at foreign
In the specific factors? model, labor is defined as? a(an)
mobile factor
In the specific factors? model, which of the following is treated as a specific? factor?
land
In the specific factors? model, a? country's production possibility frontier is? ________ because of? ________.
a curved line; decreasing marginal returns
Under perfect? competition, the equilibrium price of labor used to produce cloth will be equal to
the marginal product of labor in the production of cloth times the price of cloth.
When a? country's labor market is in equilibrium in the specific factors? model, the wage rate
will be the same in both sectors
In the specific factors? model, what will increase the quantity of labor used in cloth? production?
an increase in the price of cloth relative to food
The overall welfare effects of trade are? ________ if? ________.
positive; those who gain can compensate those who lose and still be better off
Immigration into the U.S. over the past century has caused the percentage of immigrants in the U.S. population to
fall steadily until the 1970's and increase thereafter