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== Week 36 - Classical trade theories == * '''''[[w:Factors of production|Factors of production]]''' are the ''inputs'' to the production process. ''Finished goods'' are the ''output''. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a [[w:production function|production function]]. There are three ''basic'' (AKA classical) factors of production: '''[[w:land|land]], [[w:Labor (economics)|labor]], [[w:Capital (economics)|capital]]'''''( Wikipedia ) * '''Gross domestic product''' ('''[[w:GDP|GDP]]''') is the [[w:market value|market value]] of all officially recognized final goods and services produced within a country in a given period of time. GDP [[w:per capita|per capita]] is often considered an indicator of a country's [[w:standard of living|standard of living]] ( Wikipedia ) * '''[[w:David Ricardo|David Ricardo]]''' (18 April 1772 – 11 September 1823) was a [[w:United Kingdom|British]] [[w:political economy|political economist]]. He was often credited with systematizing economics, and was one of the most influential of the [[w:classical economics|classical economists]], along with [[w:Thomas Malthus|Thomas Malthus]], [[w:Adam Smith|Adam Smith]], and [[w:John Stuart Mill|John Stuart Mill]]... ( Wikipedia ) * '''[[w:International trade|International trade]]''' is the exchange of [[w:Capital (economics)|capital]], [[w:good (economics)|goods]], and [[w:Service (economics)|services]] across [[w:international borders|international borders]] or territories ( Wikipedia ) ** '''[[w:History of international trade|History of international trade]]''' * '''[[w:Income distribution|Income distribution]]''' is how a nation’s total [[w:GDP|GDP]] is distributed amongst its population. Income and distribution has always been a central concern of economic theory and economic policy. Classical economists such as [[w:Adam Smith|Adam Smith]], [[w:Thomas Malthus|Thomas Malthus]] and [[w:David Ricardo|David Ricardo]] were mainly concerned with [[w:factor income distribution|factor income distribution]], that is, the [[w:Distribution (economics)|distribution]] of [[w:income|income]] between the main [[w:factors of production|factors of production]], land, [[w:Labour economics|labour]] and [[w:Capital (economics)|capital]]. ( Wikipedia ) * '''[[w:Exchange rate|Exchange rate]]s''' * '''[[w:Terms of trade|Terms of trade]]''' ('''TOT''') refers to the relative price of exports in terms of imports. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods. ( Wikipedia ) * '''[[w:Devaluation|Devaluation]]''' in modern [[w:monetary policy|monetary policy]] is a reduction in the value of a [[w:currency|currency]] with respect to those goods, services or other monetary units with which that currency can be exchanged. ( Wikipedia ) * '''[[w:Productivity|Productivity]]''' is the ratio of [[w:Output (economics)|output]] to [[w:Factor of production|inputs]] in production; it is a measure of the efficiency of [[w:production (economics)|production]]. ( Wikipedia ) ** Sources of productivity * '''[[w:Heckscher-Ohlin]]''' can refer to either ** '''[[w:Heckscher–Ohlin model|Heckscher–Ohlin model]]''' ('''H–O model''') is a [[w:general equilibrium|general equilibrium]] mathematical model of [[w:International economics|international trade]], developed by [[w:Eli Heckscher|Eli Heckscher]] and [[w:Bertil Ohlin|Bertil Ohlin]] at the [[w:Stockholm School of Economics|Stockholm School of Economics]]. It builds on [[w:David Ricardo|David Ricardo's]] theory of [[w:comparative advantage|comparative advantage]] by predicting patterns of commerce and production based on the [[w:Factors of production|factor]] endowments of a trading region. ** '''[[w:Heckscher–Ohlin theorem|Heckscher–Ohlin theorem]]''' is one of the four critical theorems of the Heckscher–Ohlin model. It states that a country will export goods that use its abundant factors intensively, and import goods that use its scarce factors intensively. * '''[[w:Comparative advantage|Comparative advantage]]''' refers to the ability of a party to produce a particular good or service at a lower [[w:Marginal cost|marginal]] and [[w:opportunity cost|opportunity cost]] over another. ( Wikipedia )
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