International
trade（comparative/absolute）
trade（comparative/absolute）
define the absolute advantage
One country can produce more of product than other country for given resource
The formula of terms of trade
TOT=Index of export price
Index of import priceThe definition exchange rate
price rate of a currency in terms of another currency in foreign exchange rate
Measures of protectionism (5个）
Tariff
Import quota
export subsidy
Embargo
Administrative burden/Red tape
voluntary export restrains
Tariff on export
Components of current account
Trade in good
Trade in service
primary income
secondary income
Define the comparative advantage
One country can produce good at a lower opportunity cost than others.
Cause of change in TOT
Change in global market
relative inflation rate
exchange rate
productivity
innovation
Benefit of currency appreciation
make import cheaper，as the country can buy more foreign goods for the same amount of domestic currency.
Reduce inflation cheaper imports lead to lower price for imported goods ，which reduce overall inflation pressure in the economy.
Disadvantage of protectionism
customer lose
importers lose if other country take protection
Reasons for current account deficit
Growing domestic economy
（total outport ⬆️import of resource ⬆️eg oil, visible balance⬇️
national income⬆️ domestic residence travel aboard ⬆️invisible balance ⬇️
Export may be diversity to domestic market export revenue ⬇️trans balance⬇️
MNCS send part their profit to home country primary income ⬇️
Migrant workers send income back to their relatives in home country
secondary income ⬇️