International Trade

• What is international trade?

  Trading of goods and services between countries.
• What defines a developing/emerging economy?

  A developing economy has a lower standard of living and less developed industries than other countries.
• How is economic development measured?

  By how living standards and people’s general welfare in a country change over time.
• What are exports?

  Products or services that are produced in one country and sold to buyers in another country.
• What are imports?

  Goods or services bought in one country that were produced in another.
• What is a trade deficit?

  A trade deficit occurs when a country's imports exceed its exports.
• What is a trade surplus?

  A trade surplus is when a country's exports exceed its imports.
• What is comparative advantage?

  It is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners.
• What happens as economies become more open to international trade?

  • Volume of international trade increases
  • Countries become more integrated into the global market
  • Potentially more interdependent
• What are the two categories of international trade?

  1. Inter-regional trade: trade between one region and another (e.g., EU and China)
  2. Intra-regional trade: trade within a region (e.g., within the EU)
• How does geographical location affect international trade?

  Trading with neighboring countries lowers transport costs and may have existing trading agreements.
• What has increased the volume of intra-regional trade throughout the 20th century?

  • Rise in the number of trading blocs
  • Creation of customs unions
  • Diverting trade to member states
• What are the effects of international trade?

  • Comparative advantage leads to specialization and greater efficiencies
  • More competition results in lower prices and better welfare
  • Bigger markets allow for expanded output and economies of scale
  • Knowledge transfer leads to dynamic efficiencies and faster growth
• What is the relationship between specialization and factor prices?

  Specialization increases demand for factors like labor, leading to equalization of factor prices in the long term.
• What characterizes a developed economy?

  A developed economy has sustained economic growth and security.
• What are the characteristics of a developed economy?

  Low birth rate, higher life expectancy, higher literacy levels, and a well-trained workforce.
• What defines an emerging economy?

  An emerging economy is becoming more engaged with global markets as it grows.
• What are the BRIC countries?

  Brazil, Russia, India, and China.
• What does MIST stand for?

  Mexico, Indonesia, South Korea, and Turkey.
• What does MINT stand for?

  Mexico, Indonesia, Nigeria, and Turkey.
• What characterizes a developing economy?

  A developing economy has a less developed industrial base and a low HDI relative to other countries.
• What are the characteristics of a developing economy?

  High birth rate, lower life expectancy, lower literacy levels, and generally unskilled workforce.