International Trade and Circular Flow Models

The fundamental reason for international trade is to satisfy a greater number of wants by exchanging resources that are not equally available among nations.

Inequality leads to disparities in resource distribution, necessitating trade as countries seek to access resources they lack.

International trade influences the circular flow of income by allowing for the exchange of goods and services, affecting income distribution among countries.

<p>Changes in a country's external sector can significantly affect its economic growth, employment, and overall economic stability.</p> Signup and view all the answers

<p>Trade theories provide frameworks for understanding the benefits and complexities of trade in a globally interconnected economy.</p> Signup and view all the answers

<p>Capital refers to human-made resources used to create further goods and services.</p> Signup and view all the answers

<p>Relative scarcity compels both individuals and nations to allocate limited resources to satisfy unlimited wants.</p> Signup and view all the answers

<p>Gross Domestic Product (GDP) represents the total value of final goods and services produced within an economy in a specified time period.</p> Signup and view all the answers

<p>Human capital, which includes knowledge, experience, and skills, is essential for nations to invest in for advancement and economic growth.</p> Signup and view all the answers

<p>Geographical features like climate and topography determine the agricultural and pastoral capabilities of a nation, affecting its resource availability.</p> Signup and view all the answers

<p>Australia actively seeks free trade arrangements, while Japan and the EU protect their domestic industries, particularly agriculture.</p> Signup and view all the answers

<p>In impoverished countries, a small ruling class often accrues a large portion of national income, leading to lower household disposable incomes than per capita figures suggest.</p> Signup and view all the answers

<p>Multinational corporations produce over 25% of the world's GDP, indicating their significant influence on international trade.</p> Signup and view all the answers

<p>Transfer pricing involves setting artificially high prices for transactions between subsidiaries to reduce profits in high-tax countries and shift profits to lower-tax jurisdictions.</p> Signup and view all the answers

<p>Multinational corporations have moved into China to leverage foreign investment, technology, and cheaper labor costs, influencing global production networks.</p> Signup and view all the answers

<p>International trade allows countries to specialize in the production of goods they can make most efficiently, leading to increased overall economic welfare and access to a broader range of products.</p> Signup and view all the answers

<p>One disadvantage is that international trade can lead to job losses in domestic industries that cannot compete with imported goods.</p> Signup and view all the answers

<p>Comparative advantage implies that Australia should produce and export goods for which it has the lowest opportunity cost, thereby benefiting from trade.</p> Signup and view all the answers

<p>Trade influences economic policies by prompting governments to consider competitive advantages, foreign relations, and compliance with international agreements.</p> Signup and view all the answers

<p>Trade theories provide frameworks that explain the benefits, patterns, and implications of trade relationships, enhancing comprehension of global economic dynamics.</p> Signup and view all the answers

<p>Import payments reduce the amount of money circulating in the economy, while export income brings foreign money into the economy, thereby increasing its circulation.</p> Signup and view all the answers

<p>Australia is characterized as a small, open economy because it is significantly influenced by international trade and foreign markets relative to its overall size.</p> Signup and view all the answers

<p>Trade allows for specialization, increases market size, and facilitates access to resources and technologies, driving efficiency and economic expansion.</p> Signup and view all the answers

<p>There have been fluctuations in the growth trends of both exports and imports during the past five years.</p> Signup and view all the answers

<p>Factors like volatile exchange rates, shifts in global demand, changes in commodity prices, and tariff impacts can explain the changing growth rates of exports and imports.</p> Signup and view all the answers

<p>Capital refers to human-made resources utilized to create additional goods and services.</p> Signup and view all the answers

<p>Nations allocate their limited resources according to national objectives and engage in international trade to supplement their resources.</p> Signup and view all the answers

<p>It creates significant trading volume, as countries with abundant resources trade with those that have limited resources.</p> Signup and view all the answers

<p>Human capital encompasses the knowledge, experience, and skills of individuals, which nations must invest in to progress economically.</p> Signup and view all the answers

<p>Profit motive is the drive to seek profit, serving as a fundamental stimulus for economic activities and investments.</p> Signup and view all the answers

<p>Both involve scarcity and the need to allocate limited resources efficiently to maximize utility or profits.</p> Signup and view all the answers

<p>The main motivation is to benefit from comparative advantage, allowing countries to specialize in producing goods where they have lower opportunity costs.</p> Signup and view all the answers

<p>Countries with limited domestic resources, small populations, or diverse economies tend to rely more on trade to access goods and services not produced locally.</p> Signup and view all the answers

<p>Domestic trade occurs within a single country's regulatory and legal framework, while international trade involves navigating different legal systems, currencies, and cultural practices.</p> Signup and view all the answers

<p>Capital-intensive production relies more on machinery and technology, while labour-intensive production depends primarily on human labor for output.</p> Signup and view all the answers