International Trade

Basis for International Trade The theory of absolute advantage - the advantage a nation has over other nations in the production of an item if it can produce more of the item over a certain period with a given amount of resources than the other nations can The theory of comparative advantage - the advantage that a nation has over a trading partner in the production of an item if it produces that item at lower opportunity cost per unit than its partner does

Economic gains from Trade workers in each region can obtain a larger quantity of consumer goods for the same amount of work the national income of each and every trading country rises

Protectionism vs. Free Trade impacts of a tariff on the domestic market (graph) instruments of protectionism (tariffs x import quotas)  the economic costs of tariffs effects of tarrifs on price, imports, domestic production: - encourages inefficient domestic production - induces consumers to reduce their purchases of the tariffed good below efficient levels - raises revenues for the government

Economic cost of tariff

Economic integration theory of economic integration (definition, the stages of economic integration..) process of economic integration in Europe

Foreign exchange market exchange rate the determinants of foreign exchange rates.. devaluation x depreciation, revaluation x appreciation major exchange-rate systems