#cfa-level-1 #economics #economics-in-a-global-context #los #reading-20-international-trade-and-capital-flows
Free trade occurs when there are no government restrictions on a country’s ability to trade. Under free trade, global aggregate demand and supply determine the equilibrium quantity and price of imports and exports. Government policies that impose restrictions on trade, such as tariffs and quotas (discussed later in the reading), are known as
trade protection and prevent market forces (demand and supply) from determining the equilibrium price and quantity for imports and exports. According to Deardorff,
globalization refers to the “increasing worldwide integration of markets for goods, services, and capital that began to attract special attention in the late 1990s.”
3 It also references “a variety of other changes that were perceived to occur at about the same time, such as an increased role for large corporations (multinational corporations) in the world economy and increased intervention into domestic policies and affairs by international institutions,” such as the International Monetary Fund, the World Trade Organization, and the World Bank.
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2.1. Basic Terminologypital markets, foreign assets, and greater investment opportunities. For capital intensive industries, such as automobiles and aircraft, manufacturers can take advantage of economies of scale because they have access to a much larger market. <span>Free trade occurs when there are no government restrictions on a country’s ability to trade. Under free trade, global aggregate demand and supply determine the equilibrium quantity and price of imports and exports. Government policies that impose restrictions on trade, such as tariffs and quotas (discussed later in the reading), are known as trade protection and prevent market forces (demand and supply) from determining the equilibrium price and quantity for imports and exports. According to Deardorff, globalization refers to the “increasing worldwide integration of markets for goods, services, and capital that began to attract special attention in the late 1990s.”3 It also references “a variety of other changes that were perceived to occur at about the same time, such as an increased role for large corporations (multinational corporations) in the world economy and increased intervention into domestic policies and affairs by international institutions,” such as the International Monetary Fund, the World Trade Organization, and the World Bank.
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