Trade is the exchange of goods for goods or labor service for money (indirect). Trade is based on what people can do well given their factor endowment (knowledge, abilities, skills, and resources). International trade is the exchange of good, services, and capital across international borders. International trade is based on the concept of comparative advantage, which is the country’s ability to produce a good or a service at a lower opportunity cost than other countries. Factor endowment is generally what determines the country’s comparative advantage. It is assumed that if every country is specialized in producing what they are good at producing (meaning lower opportunity cost), every country will have more goods and services and more income.
For your initial post, answer ONE of the following questions.
- Take a closer look at our local economy or a country of your interest and pick a good or a service that you believe America (or your country of choice) has a comparative advantage in producing. Discuss the factors that you believe give America (or your country of choice) such an advantage.
- In addition, which is better for a country—to export more or to import more?
- Moreover, what is the impact of trade surplus (exporting more than importing) and trade deficit (importing more than exporting) on GDP, employment, and the exchange rate of the country’s currency?
