An Introduction to International Economics.ppt
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1、Dale R. DeBoer University of Colorado, Colorado Springs,2 - 1,An Introduction to International Economics,Chapter 2: Comparative AdvantageDominick Salvatore John Wiley & Sons, Inc.,2 - 2,The basic questions of international trade,What is the basis of trade? Two answers to this question will be discus
2、sed in this chapter: Absolute Advantage and Comparative Advantage,2 - 3,The basic questions of international trade,What is the basis of trade? What are the gains from trade? The models of Absolute and Comparative Advantage show that the gains from trade are increased consumption gained through speci
3、alization in production and trade.,2 - 4,The basic questions of international trade,What is the basis of trade? What are the gains from trade? What is the pattern of trade? What determines the pattern of specialization that drives international trade?,2 - 5,The Mercantilists,What is wealth? The Merc
4、antilist answer was the stock of precious metals possessed by a country.,2 - 6,The Mercantilists,What is wealth? How can precious metals be obtained? Extraction from naturally occurring stocks This option is available to few countries,2 - 7,The Mercantilists,What is wealth? How can precious metals b
5、e obtained? Extraction from naturally occurring stocks Earn precious metals through exports of goods and services Since payment for exports is made with precious metals, exporting causes precious metals to flow into a country Similarly, since payment for imports is also made with precious metals, im
6、porting causes precious metals to flow out of country,2 - 8,The Mercantilists,What is wealth? How can precious metals be obtained? The natural conclusion exports must exceed imports for a country to become wealthy!,2 - 9,The Mercantilists,What is wealth? How can precious metals be obtained? The natu
7、ral conclusion exports must exceed imports for a country to become wealthy! Can this condition hold for all countries? No! Therefore, the wealth of one country must come at the expense of another country.,2 - 10,The Mercantilists,What is wealth? How can precious metals be obtained? The natural concl
8、usion exports must exceed imports for a country to become wealthy! Can this condition hold for all countries? Mercantilist policy Strict government control over economic activity to ensure a positive trade balance,2 - 11,The Mercantilists,What is wealth? How can precious metals be obtained? The natu
9、ral conclusion exports must exceed imports for a country to become wealthy! Can this condition hold for all countries? Mercantilist policy A further look at the Mercantilists Federal Reserve Bank of San Franciscos “Major Schools of Economic Theory” FRBSF WWW link,2 - 12,Is “wealth” precious metals?,
10、To the Mercantilists, yes.,2 - 13,Are precious metals “wealth”?,To the Mercantilists, yes. Modern measures of wealth are based on a countrys ability to produce the goods and services that improve quality of life. Hence, the Mercantilist conclusion is based a definition of wealth the differs signific
11、antly from modern notions of wealth. This distinction leads to very different conclusions about how to become a wealthy nation.,2 - 14,Absolute advantage,Built on the ideas of Adam Smith The Library of Economic Liberty Biography of Adam Smith WWW Link,2 - 15,Absolute advantage,Built on the ideas of
12、Adam Smith Absolute advantage exists between nations when they differ in their ability to produce goods. More specifically, absolute advantage exists when one country is good at producing one item, while another country is good at producing another item.,2 - 16,An example of absolute advantage,Count
13、ries Scotland Mexico Goods Coffee beans Wool,2 - 17,An example of absolute advantage,How does specialization and trade advantage Scotland? By reducing coffee bean production, resources are freed for producing more wool Each hour of production change costs 1 unit of coffee beans but gains 4 units of
14、wool,2 - 18,An example of absolute advantage,How does specialization and trade advantage Scotland? Scotland can send 3 units of wool to Mexico and receive 7 units of coffee beans back Thus, by specializing in production Scotland gains 1 unit of wool and 6 units of coffee per hour of production moved
15、,2 - 19,An example of absolute advantage,Does specialization and trade also advantage Mexico? By reducing wool production, resources are freed for producing more coffee beans Each hour of production change costs 2 units of wool but gains 10 units of coffee beans,2 - 20,An example of absolute advanta
16、ge,Does specialization and trade also advantage Mexico? Mexico can send 7 units of coffee beans to Scotland and receive 3 units of wool back Thus, by specializing in production Mexico gains 1 unit of wool and 3 units of coffee beans per hour of production moved,2 - 21,Policy recommendations from abs
17、olute advantage,Specialization and trade advantage both countries Therefore, the best policy is to allow producers and consumers in both countries unfettered access to goods from both countries to maximize the number of advantageous trades that can occur. In other words, laissez-faire. The policy of
18、 minimum government interference with economic activity.,2 - 22,A fatal flaw?,Absolute advantage requires one country to be better at production of one product and another country to be better at production of another good for specialization and trade to be mutually advantageous. What if one country
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