International Trade

Question 1

“closed” economy

Answer 1

self sufficient, no trade with outsiders, gov’t decides production

Question 2

Economics in a closed economy

Answer 2

• easy national security but no alliances; self-sufficiency
• gov’t controls production
• infant industries have an easier start
• increased employment: no jobs lost to outsourcing (nations w/ lower wages) or new technology

Question 3

politics in closed economy

Answer 3

• no foreign competition
• no incentive to update g/s
• special interests helped (protected from foreign competition)
• avoid or delay creative destruction

Question 4

closed economy famous examples

Answer 4

Soviet Union which collapsed, N Korea & low standard of living

Question 5

“open” economy

Answer 5

no gov’t interference, more freedom, actions & interactions guided by invisible hand

Question 6

open economy economics

Answer 6

markets determine prices/wages; lower prices, higher quality, more choices; lower-cost raw materials/labor; more efficiency due to comparative advantage; more customers; constant innovation

Question 7

have there been any successful closed economies in the world?

Answer 7

NO! (although there are no completely closed economies)

Question 8

type of economy that purchases g/s of greatest value at lowest possible price regardless of country of origin?

Answer 8

open economy

Question 9

ex-Soviet Union-controlled nation that’s one of the freest economies in the world

Answer 9

Estonia

Question 10

NAFTA

Answer 10

North American Free Trade Agreement (Canada, US, Mexico) in 1994

Question 11

P-A-C-E-D model

Answer 11

problem, alternatives, criteria, evaluation, decision