International Trade

What is international trade?

• Trade within a country

• Exchange of goods and services between countries

• Buying only domestic goods

• Selling only services

Exporting means:

• Bringing goods into a country

• Sending goods abroad

• Banning foreign goods

• Producing goods only for local use

A trade deficit occurs when:

• Exports > Imports

• Imports > Exports

• Exports = Imports

• No imports occur

Mercantilism promotes:

• Importing goods

• Exporting goods

• Open free trade

• No trade

Neo-mercantilism encourages:

• Increased imports

• Government encouragement of exports

• No government intervention

• Free movement of goods

The theory of absolute advantage says:

• Produce all types of goods

• Produce goods one is best at

• Specialize in goods with lowest cost

• Avoid specialization

Comparative advantage means:

• Produce goods that are most expensive

• Produce goods with lowest opportunity cost

• Import everything

• Produce only domestic goods

Factor endowment theory suggests:

• Export scarce-resources

• Export products using abundant resources

• Export goods the country lacks

• Import products the country has

Heckscher-Ohlin theory focuses on:

• Prices only

• Government policy

• Factor endowments

• National pride

What does the Law of Comparative Advantage state?

• Exports only capital goods

• Exports more labor-intensive goods

• Does not trade

• Imports only agricultural goods