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International trade is the exchange of goods, services, and capital across international borders. It includes the import and export of goods and services, as well as foreign direct investments.
International trade can be a contentious political issue. However, most economists agree that trade among nations makes the world better off. Trade can contribute to global efficiency. When a country opens up to trade, capital and labor shift toward industries in which they are used more efficiently. International trade is governed by both local laws and international laws.
The two main bases of foreign trade are comparative advantage and absolute advantage: Comparative advantage: A country's ability to produce goods at a lower opportunity cost Absolute advantage: A country's ability to produce more of a good using the same resources
Relaed Test: Economics 101 Practice Test: Trade
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