TRADE AND OTHERS SUBJECT

Mercentalism,Comparative Advantage,Absolute Advanage,H-O Theory,Intra

Industry,Market And Resource Oriented Firm,Dumping,Trade Creation,Trade
Diversion,Balance Of Payment,Foreign Exchange Rate,Depreciation,Appreciation,Spot
Transaction,Formulated Transaction

Here's an overview of the key concepts related to international trade and economics:

1. Mercantilism:

 An economic theory prevalent in the 16th to 18th centuries, emphasizing the importance
of accumulating wealth, primarily gold and silver, through a positive balance of trade
(exports > imports).
 Encourages government intervention to achieve a trade surplus and protect domestic
industries.

2. Comparative Advantage:

 A principle that suggests countries should specialize in producing goods where they have
a lower opportunity cost compared to other nations, leading to increased overall
efficiency and trade benefits.

3. Absolute Advantage:

 When a country can produce more of a good using the same amount of resources as
another country, it has an absolute advantage in that good.

4. Heckscher-Ohlin (H-O) Theory:

 Proposes that countries export goods that use their abundant factors of production
intensively and import goods that use their scarce factors intensively.
 Focuses on differences in factor endowments (labor, capital) between countries.

5. Intra-Industry Trade:

 Refers to the exchange of similar products belonging to the same industry between
countries. Common in advanced economies with similar industrial structures, such as
trading different types of cars or machinery.

6. Market-Oriented vs. Resource-Oriented Firms:

 Market-Oriented Firms: Establish production close to the market to minimize

transportation costs and respond quickly to consumer demand.
  Resource-Oriented Firms: Locate near raw material sources to reduce transportation
costs of bulky or heavy inputs.

7. Dumping:

 Occurs when a country or firm exports a product at a price lower than its domestic market
price or below its cost of production. This can harm domestic industries in the importing
country.

8. Trade Creation and Trade Diversion:

 Trade Creation: Occurs when a trade agreement leads to the replacement of more
expensive domestic production with cheaper imports from member countries.
 Trade Diversion: Happens when imports shift from a more efficient non-member
country to a less efficient member country due to a trade agreement.

9. Balance of Payments (BOP):

 A record of all economic transactions between residents of a country and the rest of the
world over a period. Includes the current account (trade in goods/services), capital
account (investment flows), and financial account.

10. Foreign Exchange Rate:

 The price of one currency in terms of another. It can be floating (determined by market
forces) or fixed (pegged to another currency or a basket of currencies).

11. Depreciation and Appreciation:

 Depreciation: A decrease in the value of a currency relative to another currency, making

exports cheaper and imports more expensive.
 Appreciation: An increase in the value of a currency relative to another currency,
making exports more expensive and imports cheaper.

12. Spot Transaction:

 A foreign exchange transaction where currencies are exchanged immediately at the

current exchange rate, typically within two business days.

13. Forward Transaction:

 An agreement to exchange currencies at a future date at a pre-agreed exchange rate. Used

to hedge against foreign exchange risk..
Growth And Development,Harrod Domer Model,Solow Model,Rostow Model,Poverty And
Ineuality,Malthusian Trap

Here's a brief overview of the key concepts related to economic growth and development:

1. Growth and Development:

 Economic Growth: An increase in the output of goods and services in an economy over
a period, typically measured by GDP.
 Economic Development: A broader concept that includes economic growth along with
improvements in living standards, reduction in poverty, enhanced education and health,
and more equitable distribution of income.

2. Harrod-Domar Model:

 A growth model that emphasizes the role of savings and investment in economic growth.
 Suggests that the growth rate of an economy depends on the savings rate and the
productivity of capital (capital-output ratio).
 Implies that economies need to invest a significant portion of their GDP to maintain
growth, and insufficient savings can constrain growth.

3. Solow Model (Neoclassical Growth Model):

 Focuses on long-term economic growth driven by capital accumulation, labor force

growth, and technological progress.
 Predicts that economies converge to a steady-state growth path determined by the savings
rate, population growth, and technology.
 Highlights the role of technological progress as a key driver of sustained growth, beyond
the accumulation of capital and labor.

4. Rostow's Stages of Economic Growth:

 A model outlining five stages through which societies progress toward economic
development:
1. Traditional Society: Limited technology and static economy.
2. Preconditions for Take-off: Development of infrastructure and external trade.
3. Take-off: Rapid industrialization and investment.
4. Drive to Maturity: Diversification and innovation.
5. Age of High Mass Consumption: Shift towards consumer goods and services.

5. Poverty and Inequality:

 Poverty: The state where individuals lack sufficient income or resources to meet basic
needs such as food, shelter, and healthcare.
 Inequality: The uneven distribution of income, wealth, or opportunities within a society.
It can be measured using tools like the Gini coefficient.
6. Malthusian Trap:

 A theory proposed by Thomas Malthus suggesting that population growth tends to

outpace agricultural production, leading to periods of famine and hardship.
 In a Malthusian trap, any technological advances or increases in productivity would lead
to population growth that consumes the surplus, keeping per capita income stagnant over
time.
 Modern economic development theories often highlight how technological progress and
capital accumulation have helped many societies escape the Malthusian trap.

These models and concepts are essential for understanding the dynamics of economic growth,
the challenges of development, and the strategies to overcome poverty and inequality.

Criteria Of LDC
The criteria for classifying a country as a Least Developed Country (LDC) are set by the
United Nations and involve a combination of economic, human resource, and environmental
vulnerability indicators. Here are the main criteria:

1. Gross National Income (GNI) per Capita:

 Threshold: A country must have a low GNI per capita to be considered an LDC. The
exact threshold is periodically updated by the UN.
 Purpose: This measures the economic strength and overall income level of the country.

2. Human Assets Index (HAI):

 Components:
1. Health Indicators: Includes under-five mortality rate and percentage of
population undernourished.
2. Education Indicators: Includes adult literacy rate and gross secondary school
enrollment rate.
 Purpose: HAI assesses the country's development in health and education sectors,
reflecting the quality of life and human capital.

3. Economic Vulnerability Index (EVI):

 Components:
1. Exposure Indicators: Includes population size, remoteness, merchandise export
concentration, and the share of agriculture, forestry, and fisheries in GDP.
2. Shock Indicators: Includes the instability of agricultural production, instability of
exports of goods and services, and the frequency and intensity of natural disasters.
 Purpose: EVI evaluates the structural vulnerability of a country to economic and
environmental shocks.

4. Population Size:
  A country must have a population of fewer than 75 million to qualify for LDC status,
although this criterion is more of a guideline than a strict rule.

Graduation from LDC Status:

 To graduate from LDC status, a country must meet two of the three criteria (GNI per
capita, HAI, and EVI) in two consecutive triennial reviews by the UN Committee for
Development Policy (CDP). Alternatively, if a country exceeds the income-only
threshold twice, it may also be eligible for graduation.

Additional Considerations:

 The sustainability of the country's development is also considered before

recommending graduation.
 Countries that graduate from LDC status may receive a transition period to adjust to the
loss of LDC-specific support and trade privileges.

These criteria aim to identify the most vulnerable countries needing international support to
improve their economic, social, and environmental conditions.

OLS method,CLRM,goodness of fit and adjusted R square,sampling