INTERNATIONAL TRADE

BALANCE OF PAYMENTS

Imports vs. exports

Positive balance of trade= trade surplus

Negative balance of trade= trade deficit

Balance of trade+ invisibles = balance of payments

TRADE

Free trade- ability to buy goods from all countries, without any barriers

Comparative cost principle- countries should produce whatever they can make the most cheaply

Countries can have:

1. absolute advantage

2. comparative advantage

PROTECTIONISM

Protecting strategic industries

World Trade Organization agreement

Tariffs

Quotas

Dumping

CONCLUSION

Countries engage in free trade based on their advantages

Balance of payments - shows transactions with other countries

Protectionism protecting national economy