Lecture 1 Flashcards
International trade
Trade of goods and services across borders, which deals with more than one government
International production
The production of goods and services across borders
International financial systems
Foreign exchange
International development
How do capital flows impact economic development, especially in ‘developing’ countries
Zero sum game
This meant, if I didn’t grab land and use it for resources and markets, then someone else would
* This economic model fueled the political model of colonialism
* This economic model was based on the old theory of mercantilism
Bretton Woods system
An adjustable peg system, with every country fixing their currencies to an anchor currency (the US dollar) and the value of the anchor currency was fixed to gold. It is also called the “gold exchange standard” system.
Absolute advantage
One country can produce a product more cheapy than another, a one-product model
Comparitive advantage
A model with two products
DD
Demand diagonals , it simplifies demand and shows a blend of demand for both. It illutrates that you have a certain mix of preferences as income increases
Ricardian model
The Ricardian Model describes a world in which goods are competitively produced from a single factor of production, labor, using constant-returns-to-scale technologies that differ across countries and goods. It measures goods in terms of opportunity cost, and it assumes that technology (a) is the main factor differentiating the two (Japan has more technology for building motorcycles, so it’s efficient at it). Everyone gains from trade
The Heckscher-Ohlin model
The HO model does pretty much the same thing as the Ricardian Model, only this time, it explicitly says that the differences comparative advantage between two countries might be due to the abundance of factor resources. Labour-intensive or high-tech production. There will be winners and losers from trade
