CH4-Other Theories Of International Trade Flashcards
Inflation-adjusted income, the amount of disposable income available to consumers.
Real income
The sum of the value added by all the goods and services produced within a particular country.
Gross National Income
Reasons why trade has an important influence upon the income distribution
- Resources
- Industries
Any resource that is used by firms to produce goods and services.
Factor of production
Model developed by David Ricardo, the first formal model of International trade.
Ricardian model of trade
Model that is sometimes referred to as the Ricardo-Viner Model
SF Model
Who are the two American economist who developed SF model.
Ronald Jones and Paul Samuelson
Territory or terrain means?
Land, labor and capital
It can be used in producing different products like labor.
Mobile Factor
It can only be used for a particular product like steel.
Specific factor
A theory in economics that predicts that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output.
Law of Diminishing marginal returns
It implies the existence of the relative global demand curve resulting from the different preferences for a certain good and relative global supply curve resulting from the different production possibilities.
The Standard Model of Trade
It is determined by the intersection between the global demand curve and the global supply curve which is the equilibrium.
Exchange rate
It refers to amount of money, which subjects (consumers) of an economy plan to spend on goods and services at the different size of income or at given prices in a given period.
Global demand
It is consists of personal consumptions or households and individuals, gross private domestics investment by businesses, gross government spending, and net export.
Total Demand
A measure of a nation’s total trade, is the value of a nation’s total export of goods and services minus the value of all the goods and services it imports.
Net exports
The intersection of the global demand curve ans the global supply curve.
Market equilibrium
It shows how many goods and services consumers can and are willing to buy at different total price levels, other conditions remaining the same.
Aggregate demand curve
Represents the relationship between price and quantity supplied, with all other factors affecting supply held constant.
Supply curve
A general model that includes the Ricardian model, the Ronald Jones and Paul Samuelson specific factors model, and the Heckscher-Ohlin (H-O) model.
Standard Trade Model
These are the lines along which the market value of output is constant.
Isovalue lines
It determines its relative supply function because it shows what the country is capable of producing.
Production possibility frontier (PPF)
The world relative supply function and the world relative demand function determines the _______ under international trade.
Market equilibrium
The price of a country’s exports divided by a country’s imports.
Terms of Trade (TOT)
This theory states that a country rich in a particular resource should be exporting products that will use that resource and import products made from resources that the country lacks.
Heckscher-Ohlin theory (factor proportions theory)
It showed that in the international division og labor, the US specialized in labor intensive rather than capital intensive goods.
Leontief paradox
A seemingly absurd or self-contradictory statement or proposition that when investigated or explained may prove to be well-founded or true.
Paradox
He received a Nobel Prize in 1973 for his contribution to the input-output analysis
Wassily Leontief
The three students of Wassily Leontief who also received Nobel prizes.
Paul Samuelson, Robert Solow and Vernon Smith.
