International Trade Simulation and Report

Topics: International trade, Free trade, Economics Pages: 4 (1417 words) Published: February 12, 2011
International Trade Simulation and Report
International trade is the exchange of goods, capital, and services across international borders or territories. In most countries this trade represents a significant share of their (GDP) gross domestic product. This type of trade has political, economic, and social importance to all nations involved. There are many factors surrounding international trade, such as, advantages, limitations, foreign exchange rates, and others. As we review these factors, this will allow us to better understand how international trade truly functions. Advantages and Limitations

International trade is based on having a comparative advantage. Countries produce products that are easier for them to produce, then other countries. A country having an advantage, can come from many different factors, availability, natural resources, relative efficiency of factors of production, and the state of technology. Each country offer a different set of advantages, like labor, land, capital, and entrepreneurship. If a country has a strong labor intensive work force, and has fertile soil, and a good climate suitable for growing, that country will excel, and have an advantage of producing agricultural goods. There are some limitations to international trade as well. Some of the limitations are trade barriers, which include government imposed restraints on the flow of goods or services, tariffs, and quotas. Tariff is a tax imposed on a product or service, and apart of a government’s policy to control trade between nations. For political reasons, tariffs are normally imposed on imported goods. Four Key Points

While doing the International Trade Simulation there were four key points that were found. “A tariff is a tax imposed by a government on imports.” (R. Glenn Hubbard & O’Brien, 2010, p. 1013). These taxes are imposed between countries therefore raising the price of a good. Tariffs increase the price of the product once it is...
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