International trade and global markets

1. Absolute advantage focuses on who produces a good using fewer resources.
2. Comparative advantage focuses on who produces a good at a lower opportunity cost.

💡 À retenir : A country can have a comparative advantage even if it lacks an absolute advantage in all goods.

1. Tariff: A tax imposed on imported goods to make them more expensive.
2. Quota: A physical limit on the quantity of a specific good that can be imported.

💡 À retenir : Tariffs generate government revenue, while quotas directly restrict supply volume.

1. A strong domestic currency makes imports cheaper but exports more expensive.
2. A weak domestic currency makes exports more competitive globally.

💡 À retenir : Currency fluctuations directly impact the trade balance ($BC$).

1. Identify the production possibilities of two goods (X and Y).
2. Divide the quantity of Y sacrificed by the quantity of X gained.
3. The result is the cost of one unit of X in terms of Y.

💡 À retenir : Always express the cost of one good in terms of the other.

1. It is the ratio between export prices and import prices.
2. Formula: $ToT = \frac{P_{exp}}{P_{imp}} \times 100$.
3. An increase means the country can buy more imports for the same volume of exports.

💡 À retenir : A rising ToT generally improves a country's purchasing power.

1. No, it can protect "infant industries" until they become competitive.
2. However, it often leads to higher prices for consumers and potential trade wars.

💡 À retenir : Protectionism is a double-edged sword; it protects jobs but reduces efficiency.

1. It sets the rules for global trade.
2. It acts as a forum for trade negotiations.
3. It settles trade disputes between member countries.

💡 À retenir : The WTO promotes the reduction of trade barriers globally.

1. Yes, exports increase aggregate demand and bring in foreign currency.
2. They allow firms to achieve economies of scale by accessing larger markets.

💡 À retenir : Exports are a key driver of economic growth in open economies.

1. It occurs when a country's imports exceed its exports.
2. It implies the country is consuming more from abroad than it is selling.

💡 À retenir : A persistent deficit may require external financing or currency devaluation.

1. Countries export goods that use their abundant factors of production.
2. A country with abundant capital will export capital-intensive goods.
3. A country with abundant labor will export labor-intensive goods.

💡 À retenir : Trade patterns are determined by factor endowments.

1. They are regulations that restrict trade without using taxes.
2. Examples: Health standards, safety certifications, and complex customs procedures.

💡 À retenir : These are often used as "hidden" protectionist measures.

1. To eliminate trade barriers between members.
2. To increase regional competitiveness.
3. To facilitate the free movement of goods, services, and labor.

💡 À retenir : Regionalism complements globalization by deepening integration.