ch5 Flashcards
(14 cards)
What is mercantilism?
Mercantilism suggests a nation’s wealth is determined by its accumulation of precious metals, especially gold. Countries aim to export more than they import to achieve trade surpluses.
What is neomercantilism?
Neomercantilism is a modern version of mercantilism, focusing on export surpluses to achieve economic, political, or social goals.
What is absolute advantage?
Absolute advantage argues that countries should specialize in producing goods they can produce more efficiently, thereby increasing overall wealth.
What is comparative advantage?
Comparative advantage suggests that countries should specialize in producing goods they are relatively more efficient at, even if they lack absolute efficiency, to maximize global gains.
How does country size affect trade?
Larger countries rely less on international trade compared to smaller ones.
What are natural and acquired advantages?
Natural advantage stems from favorable conditions like climate or resources.
Acquired advantage comes from technological advancements or specialized production.
What is the factor proportions theory?
This theory suggests that countries export goods requiring abundant and cheaper local factors of production (e.g., labor or capital).
How does product technology affect trade?
Early industrializers often lead in producing advanced goods due to their technological edge.
What does the country similarity theory state?
It states that countries with similar economic, cultural, and geographic characteristics are more likely to trade with each other.
What is the product life cycle theory?
Products are initially made in their origin country, then in other developed countries, and finally in developing countries as they mature.
What is the Diamond of National Competitive Advantage?
Michael Porter’s theory identifies four factors—demand conditions, factor conditions, supporting industries, and firm strategies—that explain why countries excel in certain industries.
What drives capital and labor mobility?
Capital and labor move internationally to seek higher returns or escape unfavorable conditions, such as skilled workers migrating to better job markets.
What are the barriers to mobility?
Restrictions on labor and capital movement limit the efficiency of global trade and production.
What is partial mobility in trade?
Neither production factors nor goods move entirely freely across borders, and even small changes in restrictions can affect trade and production costs.
