Economic Growth, Comparative & Absolute Advantage in Trade

Topic

Measures of Economic Growth and of Comparative and Absolute Advantage in International Trade

Instructions

This assignment will help students master research and other analytical skills and will help students recognize reasons why economic growth varies by country. By using macroeconomic indicators, students will complete analysis and determine comparative and absolute advantage in different product categories for each country’s economy. 

Assignment Steps 

Resources: Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products. 

Develop a minimum 1,050-word analysis of the international economy in which you do the following:

  • As a team, choose three countries from the list below. Research each country, using resources such as the CIA World Fact Book, World Bank data, World Trade Organization (WTO), and the Federal Reserve Bank. Research each of your three chosen country’s economic, political, and cultural development:
    • USA
    • Australia
    • Canada
    • China
    • Saudi Arabia
    • Democratic Republic of Congo
    • France
    • Germany
    • Great Britain
    • Italy
    • Japan
  • Analyze measures of economic growth and of comparative and absolute advantage in international trade.
  • Use tables and/or graphs to compare the following economic statistics/indicators of your three chosen countries for the most recent year available and for 2009 (the trough of the last economic cycle):
    • Country Real GDP
    • Country CPI
    • Country Real Exports
    • Country Real Imports
    • Country Unemployment Rate
    • Country Industrial Production
  • Discuss reasons why the economic growth of the three countries varies. How does international trade influence the strength of the economy worldwide?
  • Discuss the following for each country:
    • At least two products that have provided the country an absolute advantage in trade (if any).
    • At least two products that have provided the country a comparative advantage in trade.
    • Factors that might have prevented any of your three chosen countries from achieving absolute and/or comparative advantages.

Answer preview

Countries that have attained strong international trade normally develop enough power capable of controlling world economy (Economy Watch, 2010). In comparative advantage, trade benefits in a country are highly dependent on its opportunity cost in production. One of the measures and comparative advantage for a country’s economic growth in international trade is its capability to focus on exporting goods with the least opportunity cost in production to counterbalance on the other goods that it has no absolute advantage over them. In this case, a country with no absolute advantage on clothing production but has it on oil can enter into an agreement to ease the exportation expenses in exchanging the goods to another country with an absolute advantage on clothing industry.

Word count: 373