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International Economics 10th Edition by Paul Krugman,Maurice Obstfeld ,Marc Melitz
Edition 10ISBN: 978-0133423648International Economics 10th Edition by Paul Krugman,Maurice Obstfeld ,Marc Melitz
Edition 10ISBN: 978-0133423648 Exercise 1
Canada and Australia are (mainly) English-speaking countries with populations that are not too different in size (Canada's is 60 percent larger). But Canadian trade is twice as large, relative to GDP, as Australia's. Why should this be the case?
Explanation
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Gross Domestic Product ( GDP )is defined as the sum of final values of all goods and services produced within an economy during a particular period (a year or a quarter)The difference between the quantity of Country C trade Country A 's trade is mainly due to the proximity factor. Country C is nearer to Country U , whereas Country A is comparatively far-off.
When different world economies strive on trade, different conditions are taken into effect. Though Country C and Country A are not too different in size, it is the proximity between countries that matters. Country C is physically near to one of the world's biggest economies, the Country U whereas Country A is a bit geographically isolated on the world map.
As a result, the cost of transportation which is an essential part for imports and exports becomes higher for Country A than Country C. This increases the share of Country C in the world trade.
Thus, Country C trade is twice as large, relative to GDP, as Country A 's.
When different world economies strive on trade, different conditions are taken into effect. Though Country C and Country A are not too different in size, it is the proximity between countries that matters. Country C is physically near to one of the world's biggest economies, the Country U whereas Country A is a bit geographically isolated on the world map.
As a result, the cost of transportation which is an essential part for imports and exports becomes higher for Country A than Country C. This increases the share of Country C in the world trade.
Thus, Country C trade is twice as large, relative to GDP, as Country A 's.
International Economics 10th Edition by Paul Krugman,Maurice Obstfeld ,Marc Melitz
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