Trade/Globalisation Flashcards
1
Q
What is Free Trade?
A
- Free Trade is Trade between countries without the introduction of artificial barriers.
- International Trade reflects exchange and specialization;
- exchange: countries supply goods and services that they can produce relatively cheaply and buy products from other countries that they would find relatively expensive to produce
- Specialisation: benefits from trade are increased if there are economies of scale from production and if countries specialise their resources in producing certain commodities.
2
Q
What are the Potential advantages of Trade?
A
- Competition
- Comparative advantage
- improvements in dynamic efficiency
- economies of scale (lower LRAC)
- Trade is seen as a stimulant to short term aggregate demand and long run economic growth
3
Q
Disadvantages of Trade?
A
- economic dependence
- mis utilisation of natural resource
- import of harmful goods
- danger to international peace/world wars