Questions tagged [international-trade]

International trade theory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications.

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Ricardo's theory of comparative advantage

The aim of this question is to better explore the mathematical economics model behind Ricardo's theory of comparative advantage and the claims that can be made based on this model. This seems ...
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Why are imports subtracted from GDP?

GDP is a measure of a country's production. $$GDP = C + I + G + X_n$$ $C$ = Consumer Consumption $I$ = Gross Investment $G$ = Government Expenditures $X_n$ = Exports - Imports Exports are what we ...
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How is wealth created? [duplicate]

The production of 'goods and services' and 'innovation' is the usual answer. I feel that doesn't really answer the question. These things can be traded for wealth but they don't generate new wealth. ...
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523 views

How does US (its economy, banks, industry) profit from dollar being the “standard currency”?

How does US (its economy, banks, industry, "finance industry") profit from dollar being the "standard currency"? I am not seeking "ideological" explanations, but explanations of the mechanisms ...
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Why does the Balance of Payments have to (more or less) equal zero

It seems to me that the non-reversible transactions included in the current account, and the reversible transactions included in the capital and financial account, are unrelated, and should therefore ...
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642 views

Have there been instances where economists have advocated a trade embargo?

Due to Comparative Advantage, it is generally accepted among economists that free-trade is the best policy for a country and increases the standard of living for the citizens of that country and the ...
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1answer
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How could the economic cost of the world not speaking the same language be estimated?

While languages are fun and add color and flair to cultures and make the world a more interesting place, they also have a cost. Beyond the monetary costs of translation/editing/proofreading, ...
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How does a country devalue its currency?

I recently read an article in the New York Times that talked about China devaluing its currency (which I believe is held to a peg against the US Dollar). My question is: specifically what tools does a ...
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How does a bank convert one currency to another?

Say for example I sell ZAR and buy USD. What happens behind the scenes so that the local ZAR bank is able to deposit USD into my account? Does the bank require some sort of USD cash reserve? How do ...
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Is a 'Brexit' really that bad?

There seems to be a lot of fear that a Brexit will have a very bad impact on both the European and the British economy. Why would this be, does a Brexit imply that there will be less trade between EU-...
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1answer
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EU and North America with CETA

The CETA trade deal is supposed to involve only the EU and Canada, but Canada has already a trade deal with the USA and Mexico : I don't understand how this is possible. For example, if I own one ...
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725 views

What are some critiques to the principle of comparative advantage?

The principle of comparative advantage says that, in a free market, any agent should produce more of the goods for which they have a comparative advantage. The model is usually applied to advocate for ...
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Does trade lead to economic growth in the most basic models of trade?

In the standard models of trade, such as Ricardo or Hecksher-Ohlin, I know that openness to trade will lead to increased consumption as (roughly) the consumption possibility frontier expands beyond ...
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Who exploits comparative advantage in international trade?

Suppose that under autarky, Colombia makes coffee and cars at \$1 and \$2 each, and Japan makes coffee and cars at \$20 and \$10 each. Since Japan has a comparative advantage in car manufacture, the ...
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A valid argument against free trade?

Recently I read Bertrand Russell's Political Ideals (1917). Although he expresses strong left-wing ideals there, he supports free trade and criticizes protectionism. It seems that not any left-wing ...
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Uncovered Interest Parity question

I am trying to understand the fact that, given that the uncovered interest parity holds, a rise in dollar interest rates will cause the dollar to appreciate. Is this a good intuition? Uncovered ...
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Why does capital flight cause inflation?

Context: I was watching a video about Venezuela, and, it all started with capital flight due to poor confidence in the government. The government tried to stop it, and in the process it created a ...
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Ricardo's theory of comparative advantage for many countries

In textbooks on economics the Ricardo theory of comparative advantages is explained on the example of two countries with two goods. I suppose, there must be generalizations of Ricardo's theory for ...
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1answer
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Do import tariffs tend to increase a country's exchange rate (if so, why)?

From Prof. Stiglitz' Vanity Fair article: How, one might ask, is this possible, given Trump’s rhetoric, his determination to move against China with a 45 percent tariff? There’s a global ...
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US trade outpaces GDP

I notice that US exports doubled between 2000 and 2011, imports also increasing greatly, but GDP only grew by 20%. Thus, trade in the United States seems to have grown substantially faster than ...
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Why does a currency devaluation make a country more attractive for foreign direct investment?

The author of this article says "[the devaluation of the yuan] may also have impact on [foreign direct investment (FDI)] if China becomes a more attractive destination vis-a-vis India". Why is this? ...
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1answer
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How much of the Greece's public debt is created by its trade deficit?

How much of the Greece trade deficit reflects into it's public debt? Each year, Greece is importing about two times as much as it's exporting. In some years, even three times more. How much of that is ...
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Question about tariffs in Henry Hazlitt's Economics in One lesson

I've been reading Henry Hazlitt's Economics in One Lesson and he said something about free trade and tariffs that I don't quite understand. He uses the example of buying cheaper English sweaters ...
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Can anyone recommend a resource for monthly trade data for Mexico from before 2010?

Can anyone point me to a resource where I can find monthly series data (specifically for 2003-2013) on Mexico's imports and exports in nominal (current) Mexican Pesos (MEP) including broken down by ...
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Is Iphone included in tariffs?

As the tariffs war getting escalating, I am curious about how the tariffs works on Iphone. Apple is an American company, and Iphone is its product. But manufactured by factory in China. Is there a ...
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1answer
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(Modified comparative advantage model)Can trade with a country that only has one industry be mutually beneficial?

Suppose there are two countries, China and Japan. Suppose there are also only two goods, namely food and bronze mirrors. China produces both food and bronze mirrors, while Japan produces only food. In ...
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What does perfectly inelastic demand imply about gains from trade and domestic consumers?

Source: p 191, Question 9.7b, 9.7c, Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw Consider a country that imports a good. True or false. Explain your answer. b) “If demand is perfectly ...
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Why are imported Chinese products in India cheaper than those locally produced?

Why an imported Chinese product in India is cheaper compared to a locally manufactured item?
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International Trade: Two country trade problem

A country (home) is pouplated with workers who produce either Food or Clothing. There are 200 workers producing food and 100 producing clothing. Each food worker produces 6 units of food and each ...
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Retaliating against a foreign country's import tariffs

When Trump imposes tariffs on imports from China, he is hurting American consumers who won't be able to take advantage of cheap Chinese goods. If China was to retaliate by imposing tariffs on imports ...
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1answer
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International shipping services count as exports?

A Greek ship owner transports mouse traps from Albania to Japan, making every year ten million Euro in revenue and one million Euro in profits. The total value of the mouse traps he transports every ...
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Historically has the “decoupling” of world trade from GDP not lead to (or deepened) a recession?

The ECB speaks (somewhat euphemistically, in my opinion) of a "decoupling" of world trade from "activity" (i.e. GDP) in Q1 2019: Historically, has it been the case that such a "decoupling" can last, ...
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Do I make correct conclusions about international trade (and ways to increase GDP) from the expedenture approach formula for GDP?

(Please correct me if my reasoning is wrong somewhere) Net Exports is a part of GDP and consequently its increase or a decrease also causes GDP to increase or decrease, assuming everything else stays ...
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What faction determines the strength of a state's currency and can that faction be rebelled?

I know that to determine the strength of a state's currency (a currency's Equilibrium Price), the following factors are contemplated by some faction, but I don't know what is that faction. ...