Factors Impacting International Trade

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Why is the immobility of factors of production generally greater between countries than within a country?

Immigration laws, citizenship of labour, and government restrictions on international capital flows

What factor impacts the flow of goods and services between nations?

Economic, fiscal, tariff, and monetary policies

In terms of political units, where does international trade occur?

Between different political units

According to Friedrich List, how does he describe domestic trade compared to international trade?

Domestic trade is among us, international trade is between us and them Signup and view all the answers

What did Malthus believe constituted gains from trade?

The increased value which results from exchanging what is wanted less for what is wanted more Signup and view all the answers

What emerges as a result of trade involving goods valued differently by exporting and importing nations?

Gains from trade Signup and view all the answers

How does international trade lead to greater satisfaction and improved standards of living?

By enabling access to a variety of products at competitive prices. Signup and view all the answers

What are the benefits for an importing nation in terms of technology and know-how?

Access to better technology and know-how not available domestically. Signup and view all the answers

How does trade benefit less developed countries in terms of economic growth?

Trade promotes economic growth in less developed countries. Signup and view all the answers

What types of commodities can an importing country procure through trade?

Commodities that are scarce in supply or not available domestically. Signup and view all the answers

How does trade enable a country to utilize its resources optimally?

By importing goods that it does not produce efficiently. Signup and view all the answers

Why would a country necessarily have to produce all goods at home without imports?

To avoid missing out on goods that could be produced more efficiently elsewhere. Signup and view all the answers

What is the main benefit of trade for exporters?

Trade enables an exporter to sell goods in a large number of markets and choose where to sell for a better price. Signup and view all the answers

Define Terms of Trade (TOT) and what does it express?

Terms of Trade (TOT) refer to the rate at which the goods of one country exchange for the goods of another. TOT express the relation between export prices and import prices. Signup and view all the answers

What is Net Barter Terms of Trade and who introduced this concept?

Net Barter Terms of Trade is the ratio of export and import prices. It is also known as Commodity TOT and was introduced by Prof. Viner. Signup and view all the answers

How does trade help in generating employment?

Trade leads to an increase in the size of output as entrepreneurs produce for both domestic and international markets, resulting in the generation of employment. Signup and view all the answers

Explain how trade allows entrepreneurs to manage risks.

Trade enables entrepreneurs to diversify risks by selling products in international markets when there is low demand domestically. Signup and view all the answers

What determines whether Terms of Trade (TOT) are favorable or unfavorable?

When export prices exceed import prices, it is a favorable TOT. Conversely, when import prices are higher than export prices, it is an unfavorable TOT. Signup and view all the answers

Explain the infant industry argument in a few words.

Nurse the baby, protect the child, free the adult. Signup and view all the answers

What is the aim of the diversification of industries argument?

To achieve a balanced growth of industries and self-sufficiency. Signup and view all the answers

How does the imposition of a tariff promote employment according to the text?

By increasing import prices, leading to domestic production and employment generation. Signup and view all the answers

What does the Balance of Payment Argument suggest a country should do in case of a deficit?

Adopt a restrictionist trade policy. Signup and view all the answers

What are the limitations of the diversification argument?

No economy can be fully self-sufficient and it contradicts the Comparative Cost Theory. Signup and view all the answers

How does the infant industry argument relate to protecting emerging industries?

By shielding them with temporary protection until they are competitive. Signup and view all the answers

Why are tariffs considered a fiscal tool of protection?

Tariffs are considered a fiscal tool of protection because they are taxes levied on both imports and exports to protect domestic industry. Signup and view all the answers

What is the impact of import tariffs on the price of imports?

Import tariffs make imports more expensive. Signup and view all the answers

Explain the purpose of levying tariffs.

Tariffs are levied for various reasons including protecting domestic industry, generating revenue for the state, improving terms of trade, and retaliating against protectionist countries. Signup and view all the answers

Why do tariff rates need to be high when the objective is to protect domestic industry?

Tariff rates need to be high to protect domestic industry by making imported goods more expensive. Signup and view all the answers

What are some reasons for levying tariffs?

Tariffs are levied to protect domestic industry, earn revenue for the state, improve a country’s terms of trade, and retaliate against protectionist countries. Signup and view all the answers

How do tariffs impact the volume of imports?

Tariffs tend to reduce the volume of imports by making them more expensive. Signup and view all the answers