Quiz International Trade

• - The first theory of international trade

• - emerged in England in the mid-sixteenth century.

. The principal assertion of _____ was that gold and silver were the mainstays of national wealth and essential to vigorous commerce. At that time, gold and silver were the currency of trade between countries; a country could earn gold and silver by exporting goods.

The main tenet of ____ was that it was in a country’s best interests to maintain a trade surplus, to export more than it imported. By doing so, a country would accumulate gold and silver and, consequently, increase its national wealth, prestige, and power.

mercantilist writer in 1630 quoted:

“The ordinary means therefore to increase our wealth and treasure is by foreign trade, wherein we must ever observe this rule: to sell more to strangers yearly than we consume of theirs in value.”

In this theory ___ imports were limited by tariffs and quotas, while exports were subsidized.

countries should specialize in the production of goods for which they have an absolute advantage and then trade these goods for those produced by other countries

he demonstrates that by specializing in the production of goods in which each has an absolute advantage, both countries benefit by engaging in trade.

Proponent of Absolute Advantage

In this theory, it states that countries should never produce goods at home that it can buy at a lower cost from other countries.

•Principle of ___ refers to the ability of a party (an individual or firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.