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Global Trade

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jaime seagrove

on 19 April 2013

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Transcript of Global Trade

Global Trade What is global trade? Trade in the output equation This worldwide business involves making and collecting payments for transactions in goods and services, and transporting them to interested markets. Trade enters the output equation as net exports (exports - imports) Global trade is the exchange of goods and services between countries Balance of payments Balance of current accounts Balance of capital accounts Balance of services Balance of trade: Net exports = exports - imports Y = C + I + G + X -M
Y = output or GDP
C = consumption
I = investment
G = government spending
X = exports
M = imports A country's income increases as long as its exports grow faster than its imports Waves of globalization International trade is the fundamental force towards further globalization. Therefore, greater the global trade greater the level of globalization. Economists consider two waves of globalization: one in the pre-World War I period, and the other one began in the 1970's. Globalization punctuated by 3 events/factors World War I
Great Depression 1930's
World War II Trade Facts History has shown that political factors, such as wars, can change trade patterns much more than innovations in communication and transportation.
Cultural affinity: if 2 countries have cultural ties, it's likely that they also have strong economic ties.
Geography: ocean harbors and a lack of mountain barriers make transportation and trade easier *GDP - measures the total value of all goods and services produced in an economy Total U.S trade with major partners in 2006 Over the past 40 years, the exports of developing countries have shifted toward manufactures. More than 90 percent of the exports of China, the largest developing economy and a rapidly growing force in world trade, consists of manufactured goods. Most common traded goods Crude oil and Derivatives (heating oil and gasoline)
Agriculture (wheat, corn, maize, rice)
Animals and Animal Products
Cocoa, Butter, Orange juice, Sugar
Precious Metals (gold, silver, and platinum)
Natural Gas
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