Economics 101 Practice Test: Trade — Flashcards

Trade is a fundamental economic concept that involves the exchange of goods and services between different economic actors. Trade can occur in a producer-consumer economy. 

In financial markets, trade refers to the buying and selling of securities, commodities, or derivatives. In macroeconomics, trade usually refers to international trade. International trade occurs when countries put goods and services on the international market and trade with each other. 
Trade can have different meanings in different contexts. For example, trade that takes place between two parties is called bilateral trade, while the same occurring between more than two parties is called multilateral trade. 
Most economists agree that trade among nations makes the world better off. Trade contributes to global efficiency by shifting capital and labor toward industries where they are used more efficiently. This can lead to higher living standards in both countries. 
However, trade can also bring dislocation to those firms and industries that cannot cut it. Firms that face difficult adjustment because of more efficient foreign producers often lobby against trade.