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Naked Economics Chapter 12
Transcript of Naked Economics Chapter 12
Trade and Globalization
"Imagine a spectacular invention: a machine that can convert corn into stereo equipment...Or a Boeing 777 into enough fresh fruits...Amazingly this invention already exists. It is called trade"
The action of buying and selling goods and services
A modern economy is built on trade. We pay others to do or make things that we can’t or choose not to, usually because we have something better to do with our time.
What Is Trade?
Absolute advantage- when a country can produce a greater quantity of a good, product, or service than competitors, using the same amount of resources
Comparative advantage- when a country can carry out a particular economic activity (such as making a specific product) more efficiently than another activity
Specialization- a method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas.
Why Do We Trade?
Does Trade Help the Small Countries?
As a weapon:Cutting off trade leaves a country poorer and less productive, which is why we tend to do it to our enemies.
We lose jobs to outsourcing but new jobs are created with specialization
Protectionism the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.
Economists reckon that the tariffs on Brazilian oranges and juice limit the supply of imports and therefore add about 30 cents to the price of a gallon of orange juice
Trade In the United States
Yes! Every country that is trading on a global level has an improved standard of living
By trading they receive items they either can't or don't poduce domestically. Ie. Technology and medicine.
With trade and globalization they don't have to be a small, poor country
Countries are poor because they are not productive.
Productivity is what makes us rich. Specialization is what makes us productive. Trade allows us to specialize.