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
What is Absolute Advantage in All Goods? What happens to the possibilities for trade if one country has an absolute advantage in everything? This is typical for high-income countries that often have well-educated workers, technologically advanced equipment, and the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Specialization allow for a gain from Trade? Consider the category of machinery, where the U.S. economy has considerable intra-industry trade. Machinery comes in many varieties, so the United States may be exporting machinery for manufacturing with wood, but...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Is a Trade Balance or Trade Surplus Better? 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 surpluses are good...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Does the Business Cycle Affect Trade Balances? In the short run, whether an economy is in a recession or on the upswing can affect trade imbalances. A recession tends to make a trade deficit smaller, or a trade surplus larger, while a period of strong economic...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Domestic Saving and Investment Determine the Trade Balance?One insight from the national saving and investment identity is that a nation’s own levels of domestic saving and investment determine a nation’s balance of trade. To understand this point,...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Balance of Trade as a Balance of Payments? The connection between trade balances and international flows of financial capital is so close that economists sometimes describe the balance of trade as the balance of payments. Each category of the current...
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...
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
How does U.S. unemployment insurance work? Unemployment insurance is a joint federal–state program that the federal government enacted in 1935. While the federal government sets minimum standards for the program, state governments conduct most of the administration....
