International trade is a function of the unequal domestic exchange ratios.

Question

Quizplus · Accepted Answer

International trade occurs when countries specialize in producing goods or services in which they have a comparative advantage and then exchange these goods with other countries. The exchange ratios are conditioned by domestic exchange ratios. Domestic exchange ratios can be influenced by factors like relative input costs, labor productivity, technology, and economies of scale, which can vary across countries, resulting in unequal exchange ratios. Hence, international trade is a function of the unequal domestic exchange ratios.

International Trade Is a Function of the Unequal Domestic Exchange