imports
good and services purchased from other countries
exports
goods and services sold to other countries
Globalization
phenomenon of growing economic linkages among countries
Hyperglobalization
phenomenon of extremely high levels of international trade
comparative advantage
A country has * advantage in producing a good if the opportunity cost of producing the good is lower for that country than for other countries
Ricardian model of international trade
analyzes international trade under the assumption that opportunity costs are constant
Autarky
situation in which a country does not trade with other countries
absolute advantage
Trade is based on * advantage
factor intensity (of production of a good)
measure of which factor is used in relatively greater quantities than other factors in production
Heckscher-Ohlin model
According to *, a country has a comparative advantage in a good whose production is intensive in the factors that are abundantly available in that country
domestic demand curve
curve that shows how the quantity of a good demanded by domestic consumers depends on the price of that good
domestic supply curve
curve that shows how the quantity of a good supplied by domestic producers depends on the price of that good
free trade
an economy when the government does not attempt either to reduce or to increase the levels of exports and imports that occur naturally as a result of supply and demand
trade protection (or simply protection)
policies that limit imports
import quota
legal limit on the quantity of a good that can be imported
international trademagreements
treaties in which a country promises to engage in less trade protection by other countries to do the same for its own exports
World Trade Organization
oversees international trade agreements and rules on disputes between countries over those agreements
North American Free Trade Agreement (NAFTA)
trade agreement among US, Canada, and Mexico
European Union (EU)
customs union among 28 European Nations
Difference in Climate
Differences in Factor Endowments
Differences in Texhnology
3 main sources of comparative advantage