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.
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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
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3
Q

Disadvantages of Trade?

A
  • economic dependence
  • mis utilisation of natural resource
  • import of harmful goods
  • danger to international peace/world wars
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