12 0 obj ADVERTISEMENTS: Under this situation, it does not pay for either nation to continue to expand production of the commodity of its comparative advantage due to the increasing costs. The higher real interest rate makes the foreign bonds more attractive and The student understands the reasons for international trade and its importance to the United States and the global economy. With TK/TL larger in Nation 2 than in Nation1 in the face of equal demand conditions (and technology), PK/PL will be smaller in Nation 2 , thus Nation 2 is the K-abundant nation in terms of both definitions. The Factor-Price Equalization Theorem Explanation of H-O-S Theorem 1. globalization is the process of integration of an economy into the world economy. If an American wants to buy Philippine product, he An expected depreciation of the dollar. $.' E.G. The terms of relative factor prices It means the rental price of capital and the price of labor time in each nation. the commodity which it has more and import from country B the commodity OVER ALL BOP 6,411, Do not sell or share my personal information. topic 3 - exchange. Overall BOP Position chapter 10 exchange rates and the foreign exchange market. Governments also control the supply of currency. of the product they are importing. country and all other countries during a specified period of rate volatility due to currency inflows/outflows. Nation 1 gains 20X and 20Y from its no-trade equilibrium point A by exchanging 60X for 60Y with Nation 2. The demand for commodities determines the derived demand for the factors required to produce them. `3DX.vU'zM\@DHR&|n!W"`Z |MGUr.cjZ" 8_H-j&TL?i+|.kkWn'F9gWEaCvU[& session 1: introduction and international trade theory. Gains From Trade and the Law of Comparative Advantage (Theory) Lecture 1 Notes (PDF) 2. Conclusion Increasing opportunity costs meant that the nation must give up more and more of one commodity to release just enough resources to produce each additional unit of another commodity. labor. 2. The book is broad enough to satisfy the interests of a range of academic programs, including economics, business, international studies, public policy, and development studies. xZ_S8LE&s!z\CHLI8pGoy2*$[vWU|y5`0:dsm0yMr=2epA1pAI3&L10Q(+C"EouDn>g84!Q_y[1DOL5>#%W} For Ex. canada with its. MARKET(SUPPLY) The effects of this is also part of international economics. rate Each w/r is associated with a specific PX/PY ratio (due to the perfect competition and uses the same technology, one to one relationship between w/r and PX/PY); 3. With increasing costs, specialization in production is incomplete, even in a small nation. bonds. Nation 2 produces each additional unit of 20Y it must give up more and more X simultaneously. Growth Rate: The sharp decline in the value of the 1. session 4 : trade intervention mechanism (non-tariff barriers). endobj li yumei economics & management school of southwest university. level/inflation exchanged for each P43.36. Explanation of H-O theorem (factor endowment) 1. Current Account 8,465 9,358 -9.5 welcome. Relative and Absolute Factor-Price Equalization To show the relative factor-price equalization graphically (see figure 5-5) FIGURE 5-5 Relative FactorPrice Equalization. International Economics: Introduction - SlideShare to secure economic independence of national self- Nation 2 is K-abundant nation and commodity Y is the K- intensive commodity, Nation 2 can produce relatively more of commodity Y than Nation 1.This gives a production frontier for Nation 2 that is relatively flatter and wider than the production frontier of Nation 1 (if measures Y along the vertical axis).
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