Frågor Flashcards
Describe the Mercantilist’s views on trade
During 1600 to 1700.
Export more than import. Fill the export surplus with gold or silver. the more of that the richer the country. Because only one country could export more they was always in conflict with each other.
Describe the difference between the Labor Theory of Value and the Opportunity cost theory
Labor theory of value, the value of a commodity depends on the amount of labor used to produce it
Opportunity cost theory, how much you give up by choosing the other alternative. Just enough resources to produce on additional unit of the first good
Define MRT
The rate of how much good you have to give upp in order to gain another. It is tied to supply and PPF
Define MRS
It’s tied to demand (consumers) How much of one good will I give up to get the other good. Example I love oranges and how apples will I buy instead of oranges to satisfy my need?
Why do nations consume & produce in such a way that MRT=MRS in isolation in the Standard Theory?
There’s where equilibrium is. Supply and demand. MRT=MRS
What’s an offer curve
It’s the quantity of how much a country will export in each quantity in how much to import. It’s the same as PPF
Terms of trade
is the price of export divides by the price of import. Usually indexes. It shows if country is exporting or importing more.
What’s autarky?
When country is self sufficient and doesn’t need external help. No need for trade.
What’s comparative advantage
the country with the lowest opportunity cost has comparative advantage because they are good at it. Specialize at that good.
Trade diversion
When a country outside a union is replaced by a country that is member inside the union. It’s pricier than before but still cheaper than no trade
Trade creation
When member inside union is replaced by country outside union
f you meet the prime minister of a poor country, and she asks you what trade policies her nation should use, what would your recommendations be?
Set tariff on imported goods. In that way welfare will increase. Production in your country will go up instead of importing it cheap.
f you meet the prime minister of a rich country, and she asks you what trade policies her nation should use
Try to get good in producing the goods that you are importing so you can produce it yourself. If it’s big country, higher the export prices.
“Has international trade increased US wage inequalities?” has been discussed a lot. Describe how it is discussed in Salvatore
Trade has only done it to 10%. It’s because technological changes and improvements.
Explain in your own words “the effect of trade on distribution of income” according to the H-O theory.
Wages and other factors will be the same after specialization and trade has occurred. Stolper Samuelson theorem. The abundant factor in the country will rise and the other lower. But will trade it will get the same.
