by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does the Production Possibilities Frontier reflect Comparative Advantage? Absolute advantage simply compares the productivity of a worker between countries. It answers the question, “How many inputs do I need to produce shoes in Mexico?” Comparative advantage asks...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Comparative Advantage give rise to Mutually Beneficial Trade? When nations increase production in their area of comparative advantage and trade with each other, both countries can benefit. Again, the production possibility frontier is a useful tool to...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Economies of Scale Lead to Trading Advantages? A second broad reason that intra-industry trade between similar nations produces economic gains involves economies of scale. The concept of economies of scale means that as the scale of output goes up, average...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Income Payments? Income payments on assets, as the name implies, is income resulting from ownership of assets – including, interest, dividends, rents, royalties, etc. The third component of the current account balance, labeled “income payments,” refers...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Is it better to have a trade surplus or a trade deficit? Because flows of trade always involve flows of financial payments, flows of international trade are actually the same as flows of international financial capital. The question of whether trade deficits or...
