Chapter 2 Global economy PART 2

Descriptive Theory

It deals with the natural order and the movement of trade.

Descriptive Theory

It describes the pattern of trade under the idea of laissez-faire, a French term which means "leave alone" .

Descriptive Theory

It refers to the notion that individuals are the best economic agents to solve problems through the invisible hand rather than government policies.

Descriptive Theory

It also addresses the questions of which product to trade, how much product to offer and produce, and which country to trade in the absence of government restrictions.

Prescriptive Theory

It prescribes whether the government, an important economic institution, should interfere with and restrict the movement of goods and services

Prescriptive Theory

This theory views the government to have participating in deciding which countries to alter the amount, composition, and direction of goods.

Mercantilist, Economic Liberals, Structuralist

What are the Three Perspective on International Trade?

Economic Liberals

For David Ricardo, his influential work, the Law of Comparative Advantage, explains that free trade efficiency is attainable if two countries can produce more goods and trade products separately.

David Ricardo

his influential work, the Law of Comparative Advantage, explains that free trade efficiency is attainable if two countries can produce more goods and trade products separately

Economic Liberals

The advantage of this theory in international trade is deriving the principle of specialization and division of labor of Adam Smith

Nau 2009

Who said, The advantage of this theory in international trade is deriving the principle of specialization and division of labor of Adam Smith

Economic Liberals

Countries have different resources and talents; they are better suited to perform in certain economic activities than in others

Cost of Production, Availability of Resources, How Efficient it is to buy or produce goods

Economic Liberals believe that people and businesses should be free to make their own choices based on:

Economic Liberals

They believe that people and businesses should be free to make their own choices based on:

The cost of production

The availability of resources

And how efficient it is to buy or produce goods

Mercantilists

It is an economic theory emerged from about 1500-1800. This period was the emerging eras of nation-states and the formation of more central governments.

Higher export than import, Export less high valued product and import less high valued product, Benefits of colonial powers

What are under Mercantilists?

Higher Export than Import

Governments imposed restrictions and policies requiring the economy and its market to produce higher exports that products and services purchased outside the country or import. Countries used this mechanism to support their trade objectives and strengthen their colonial rule and possessions.

Export Less High Valued Product and Import Less High Valued Product

It prevented and monopolized the production and manufacturing operation of the colonies.

Benefits of Colonial Powers

Mercantilism is adopted to increase and sustain the colonial power and its authority to direct and control the economic activity of the colony

The Modern World System

This theory developed by Immanuel Wallerstein explains the contact of economies between core, semi-peripheral, and peripheral countries in the world. transformation in some ways

Structuralists

The Modern World System (MWS) theory developed by Immanuel Wallerstein explains the contact of economies between core, semi-peripheral, and peripheral countries in the world. transformation in some ways. This was under by?

Structuralists

The core states have the absolute advantage over the other through unequal exchange and extraction of raw materials from the periphery and semi-periphery.

Structuralists

This system, as part of the structure of global capitalism, involves exploitation and transformation in some ways.