Module 5 Flashcards
What do you call the exchange of raw materials and manufactured goods (and services) across national borders?
International Trade
What explains national economy conditions–country
advantages–that enable such exchange to happen?
Classical Trade Theories
What explains links among natural country advantages,
government action, and industry characteristics that enable such exchange to happen?
New Trade Theories
What are the 5 Classical Trade Theories?
MACFI
Mercantilism
Absolute Advantage (Adam Smith, 1776)
Comparative Advantage (David Ricardo, 1817)
Factor-proportions (Heckscher-Ohlin, 1919)
International product life cycle (Ray Vernon, 1966)
What prevailed in 1500 - 1800 where a country exports more to “strangers” than it imports to amass treasure, expand kingdom?
Mercantilism/Neomercantilism
Today neo-mercantilists are called as?
Protectionists
Absolute Advantage is explained by who and in what year in the book Wealth of Nations?
Adam Smith, 1776
What weakens countries in long run; and enriches only a few?
Mercantilism
A country has what when it is more productive than another country in producing a particular product?
Absolute Advantage
Comparative Advantage is explained by whom, and in what book and year?
David Ricardo: Principles of Political Economy, 1817
In the New Trade Theories, what happens to the
industry’s ability to realize economies of scale and unit costs as output expands with specialization?
Economies of Scale increases
Unit Costs decrease
Which classical trade theory explains that a country should specialize in the production of those goods in which it is relatively more productive… even if it has absolute advantage in all goods it produces?
Comparative Advantage
Which new trade theory explains that differences in factor endowments not on differences in productivity determine patterns of trade?
Heckscher-Ohlin Theory
What explains that US has relatively more abundant capital yet imports goods more capital intensive than those it exports?
Leontief Paradox
What are the factors of production in the Theory of Relative Factor Endowments?
labor, capital, land, human
resources, technology
Which theory explains that absolute amounts of factor endowments matter?
Heckscher-Ohlin Theory
Heckscher-Ohlin Theory is also known as what?
Theory of Relative Factor Endowments
According to the Theory of Relative Factor Endowments, what varies among countries?
Factor Endowments
According to the Theory of Relative Factor Endowments, products differ according to what?
types of factors that they need as inputs
According to the Theory of Relative Factor Endowments, a country has what in producing products that intensively use factors of production (resources) it has in abundance?
Comparative Advantage
According to the Theory of Relative Factor Endowments, factors of production include what?
labor, capital, land, human
resources, technology
Which theory is when most new products conceived/produced in the US in 20th century?
International Product Life-Cycle
What do you call Porter’s Theory?
National Competitive Advantage
In New Trade Theories, what happens to returns of specialization due to economies of scale?
It increases
