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ECON 1204 Lecture 2

Terms in this set (18)

International trade
exchange of goods and services among the world
export
product sold from one country to another
import
product bought from one country from another
merchandise trade
trade of physical goods
service trade
accounting and legal services
trade balance
the difference between a nation's total exports and total imports
trade surplus
export is larger than import
trade decifit
export is smaller than import
globalization
the growing interdependence of countries resulting from the increasing integration of production rade in goods and services, and also finance (foreign direct investment (FDI) and portfolio investment), movement of people (migration), and ideas (technology, culture).
top Us trade partner (page 3) EXPORT
Canada Mexico China
machinery include computer, equipment
top trade IMPORT
China, Mexico, Canada
machinery include computer, equipment, oild, pharmaceutical, organic chemistry

The amount we import is larger than the amount we export to these countries
Argument of David Ricardo
A country's total resource include labor, capital, human capital, natural resources--> aggregate them into one total resource called Labor.
When a worker works, he use all his time, skill, capital
We can measure the contribution of all these resources to production as worker's work time (labor) only
Absolute Advantage
being able to produce more using the same resoureces.
more productive
Labor productivity
the quantity of output produced per time period
How we measure a country's aggregate labor productivity ?
Total output of a country/ number of total labor hours
If we want to calculate labor productivity for a particular production sectors (pizza production)
total pizza output and divide it by works hours
opportunity cost of wings
=autarky relative price of wings = opportunity cost of the product on the horizontal axis
Comparative Advantage
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