International Economics : International Macroeconomics

The international trade sector of the U.S. economy continues to draw attention in economic and political circles. It is true that, the international market has become increasingly important as a source of demand for U.S. production and a source of supply for U.S. consumption. Indeed, it is substantially more important than is implied by the usual measures that relate the size of the international sector to the overall economy. This paper explores the role international trade now plays in the U.S. economy and answers the important questions for economic policy: How does international trade affect economic well-being? Who gains and who loses from free

Main protectionist policies include tariffs, quotas, embargos and voluntary export restraints, and Adam Smith’s idea of absolute advantage has been developed further to explain international trade. In recent years, protectionism has become closely related to globalization during which the influences of trades spread almost everywhere, so people insist upon the study of social deformities generated by improper policies on international trade and the task of pointing them out with a view to remedy. There are certainly both economic and political purposes of trade

14. Give a good working definition of the practice of “mercantilism”. Mercantilism is economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances,

Key Terms and People mercantilism Mercantilism is a theory that states that a country grows to be strong and important through money that comes from a favorable balance of trade, meaning that a country must export more goods than it imports. Mercantilism kept England powerful, as the colonies provided raw goods that were used to make ships for the navy. Also, the raw goods were used to make products that were sold to other countries. England also had no cause to buy certain products from other countries. It was able to export more products than it imported, keeping the county wealthy and powerful.

The Europeans began trying to save as much money as possible by only trading with the “mother country,” and by transporting goods on their own ships. A German once said “the more silver, the stronger the state.” Nations began not letting their money leave and enrich others. The idea of “free trade” contrasts from the concept of mercantilism because free trade has imported and exported goods flow without trouble or hesitation. Adam Smith had made a non taxation system of trading. While mercantilism was a system of benefiting off the

Mercantilism, the economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism. A concept which its purpose is of the colonies, to provide Great Britain

A mercantilist believes that there are winners and losers in the market, rather than a mutual benefit through trade. A government that has instituted mercantilism, will try to suppress imports and encourage exports, so that their country is the “winner”. Internal markets are either subsidized or repressed through fines by the government, because they believe that people can’t be left to produce and buy whatever they want in a free market.

International trade theory provides explanations for the pattern of international trade and the distribution of the gains from trade. The study of trade emerged in the era of mercantilism (approximately in 16th century) as a crude set of arguments about how a nation should trade. The theory of International Trade examines the reasons why different countries exchange their products, but in addition the aftermath that this process has, in the internal economy of a country involved in international trade. Adam Smith, in The Wealth of Nations in 1776, postulated that under free trade, each nation should specialize in producing those goods that it could produce most efficiently. Some of these would be exported to pay for the imports of goods that could be produced more efficiently elsewhere. Smith ridiculed the fear of trade by comparing nations to households. Since every household finds it worthwhile to produce only some of its needs and to buy others with products it can sell, the same should apply to nations. The theory of absolute advantage is based on the assumption that the nation is absolutely better (i.e., more efficient) at production of

Mercantilism Mercantilism is the economic theory that a nation's prosperity depends on its supply of gold and silver; that the total volume of trade is unchangeable. This theory suggests that the government should play an active role in the economy by encouraging exports and discouraging imports, especially through the use of tariffs. Spain and England used the mercantile system to benefit the mother countries. The mercantile system had special regulations, which usually extracted some sort of reaction from the colonies. If necessary, the policies would be changed to better suit the mother country.

Mercantilism was an economic system that developed in Europe between the 16th and 18th century during the period of the new monarchies. This economic philosophy is based on the belief that a nation’s wealth depends on accumulated treasure, usually precious metals such as gold and silver, and to increase wealth, government policies should promote exports and discourage imports. Adam Smith, an eighteenth-century Scots professor of moral philosophy who influenced the founding fathers of

The theory of comparative advantage explains the benefit of free trade. According to this theory by David Ricardo in the early 19th century, “Both countries will be better off if each specializes in the industry where it has a comparative advantage, and if the two trade with one another.” (Citation) International trade opens up markets to foreign supplier, and domestic companies need to improve their efficiency, boost productivity, and lower cost to increase competitiveness instead of enjoying monopolies or oligopolies that enabled them to keep prices well above marginal costs. On the other hand, international trade also offers domestic companies bigger demands and broader markets; therefore more jobs relevant to export have been created. Furthermore, jobs in the US supported by goods exports pay 13-18 percent more than the US national average (ustr.gov).

This paper was prepared for GD530 Economics and the International System, taught by Professor Snow

Wealth of Nations (1776) by Adam Smith and Principles of Economics (1951) by David Ricardo heralded the formulation international trade theories. To Adam Smith it was the division of labor that reduces cost production and that would ensure competitiveness in the international markets. Smith contended that the problem of monetary adjustment to countries having continuous trade surplus could be solved by automatic adjustments. Basic premises of the trade theory were formulated by David Ricardo. Free trade theory as opposed to Mercantilists trade protection was championed by Adam Smith and David Ricardo. For Smith and Ricardo free was mechanism to increase the productive efficiency at global level. Ricardo’s cost calculation was based

Mercantilism was a sixteenth-century economic philosophy that maintained that a country's wealth was measured by its holdings of gold and silver (Mahoney, Trigg, Griffin, & Pustay, 1998). This recquired the countries to maximise the difference between its exports and imports by promoting exports and discouraging imports. The logic was transparent to sixteenth-century policy makers-if foreigners buy more goods from you than you buy from them, then the foreigners have to pay you the difference in gold and silver, enabling you to amass more treasure. With the treasure acquired the realm could build greater armies and navies and hence expand the nation’s global influence.

Mercantilism is an economic system used in European countries in 1800s. and 16th to the mid 18th century. under mercantilism the countries wealth is measured by the accumulation of valuable metals like gold and silver.(Piggott. j and cook .m)