X5MB. Lectura Grupo 8
Other Possible Benefits of Trading Globally
International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and other assets. In theory, economies can therefore grow more efficiently and can more easily become competitive economic participants.
International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity of foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and other assets. In theory, economies can therefore grow more efficiently and can more easily become competitive economic participants.
For the receiving government, FDI is a means by which foreign currency
and expertise can enter the country. These raise employment levels, and,
theoretically, lead to a growth in the gross
domestic product. For the investor, FDI
offers company expansion and growth, which means higher revenues.
SEE: The Importance Of Inflation And GDP.
Free Trade Vs. Protectionism
As with other theories, there are opposing views. International trade has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free trade is the simpler of the two theories: a laissez-faire approach, with no restrictions on trade. The main idea is that supply and demand factors, operating on a global scale, will ensure that production happens efficiently. Therefore, nothing needs to be done to protect or promote trade and growth, because market forces will do so automatically.
Free Trade Vs. Protectionism
As with other theories, there are opposing views. International trade has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free trade is the simpler of the two theories: a laissez-faire approach, with no restrictions on trade. The main idea is that supply and demand factors, operating on a global scale, will ensure that production happens efficiently. Therefore, nothing needs to be done to protect or promote trade and growth, because market forces will do so automatically.
In contrast, protectionism holds that regulation of international trade is important to
ensure that markets function properly.
Advocates of this theory believe that market inefficiencies may hamper the
benefits of international trade and they aim to guide the market accordingly.
Protectionism exists in many different forms, but the most common are tariffs, subsidies and quotas. These
strategies attempt to correct any inefficiency in the international market.
The Bottom Line
As it opens up the opportunity for specialization and therefore more efficient use of resources, international trade has the potential to maximize a country's capacity to produce and acquire goods. Opponents of global free trade have argued, however, that international trade still allows for inefficiencies that leave developing nations compromised. What is certain is that the global economy is in a state of continual change, and, as it develops, so too must all of its participants.
The Bottom Line
As it opens up the opportunity for specialization and therefore more efficient use of resources, international trade has the potential to maximize a country's capacity to produce and acquire goods. Opponents of global free trade have argued, however, that international trade still allows for inefficiencies that leave developing nations compromised. What is certain is that the global economy is in a state of continual change, and, as it develops, so too must all of its participants.
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Economics
Basics: Introduction
Economics may appear to be the study of complicated tables and charts,
statistics and numbers, but, more specifically, it is the study of what
constitutes rational human behavior in the endeavor to fulfill needs and wants.
As an individual, for example, you face the problem of having only
limited resources with which to fulfill your wants and needs, as a result, you
must make certain choices with your money. You'll probably spend part of your
money on rent, electricity and food. Then you might use the rest to go to the
movies and/or buy a new pair of jeans. Economists are interested in the choices
you make, and inquire into why, for instance, you might choose to spend your
money on a new DVD player instead of replacing your old TV. They would want to
know whether you would still buy a carton of cigarettes if prices increased by
$2 per pack. The underlying essence of economics is trying to understand how
both individuals and nations behave in response to certain material
constraints. ((To learn how economic factors are used in currency trading, read
Forex Walkthrough: Economics.)
We can say, therefore, that economics, often referred to as the "dismal science", is a study of certain aspects of society. Adam Smith (1723 - 1790), the "father of modern economics" and author of the famous book "An Inquiry into the Nature and Causes of the Wealth of Nations", spawned the discipline of economics by trying to understand why some nations prospered while others lagged behind in poverty. Others after him also explored how a nation's allocation of resources affects its wealth.
To study these things, economics makes the assumption that human beings will aim to fulfill their self-interests. It also assumes that individuals are rational in their efforts to fulfill their unlimited wants and needs. Economics, therefore, is a social science, which examines people behaving according to their self-interests. The definition set out at the turn of the twentieth century by Alfred Marshall, author of "The Principles Of Economics" (1890), reflects the complexity underlying economics: "Thus it is on one side the study of wealth; and on the other, and more important side, a part of the study of man."
We can say, therefore, that economics, often referred to as the "dismal science", is a study of certain aspects of society. Adam Smith (1723 - 1790), the "father of modern economics" and author of the famous book "An Inquiry into the Nature and Causes of the Wealth of Nations", spawned the discipline of economics by trying to understand why some nations prospered while others lagged behind in poverty. Others after him also explored how a nation's allocation of resources affects its wealth.
To study these things, economics makes the assumption that human beings will aim to fulfill their self-interests. It also assumes that individuals are rational in their efforts to fulfill their unlimited wants and needs. Economics, therefore, is a social science, which examines people behaving according to their self-interests. The definition set out at the turn of the twentieth century by Alfred Marshall, author of "The Principles Of Economics" (1890), reflects the complexity underlying economics: "Thus it is on one side the study of wealth; and on the other, and more important side, a part of the study of man."
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