International Trade

• Why does international trade impact goals and LS's?

  As international transactions (imports, exports, foreign investments) makes up 20% of AD
• What does international transactions affect?

  Efficiency, resource allocation, living standards, economic growth, unemployment
• What is trade liberization?

  Cut tariffs (import taxes) and red tape, allowing more free trade.
• Competitive advantage?


  Condition that puts companies/countries in favorable business positions
• Economies of scale?


  Proportionate saving in costs gained, by increased level of production.

  eg: fixed costs can be spread over the increased output when International trade increases
• How does International transactions affect Inflation and LS?

  AUD, when it depreciates/appreciates can lead to cost inflation or demand inflation
• Types of international transactions?

  Foreign aid

  Human capital flows (increased freedom for ppl to work in other countries)

  Financial capital flows (investment spending in or out of Australia)
• Gains from international trade?

  Lower prices (more competition)

  Greater choice (more competition) so firms wanna diverse and sell unique g/s

  Access to resources (can source cheap resources overseas)

  Economies scale (fixed costs spread over more units)

  Increased competition

  Increased efficiency (more competition)

  Increased intertemporal (while trying to achieve technical)