Chapter 1, Problem 1Q

To determine

Explain the importance of international trade to global economy.

Answer to Problem 1Q

International trade refers to exchange of goods and services between different nations. With the advent of globalization, every country is dependent on one another for meeting various needs like that of capital, raw materials and labor. Such a move where nations have opened their economy to each other has impacted global economy to a great extent.

Explanation of Solution

International Trade:

Economics is all about efficient allocation and utilization of scarce resources. International trade has facilitated smooth purchase and sale of goods in different markets of the world, thereby enabling fuller utilization of resources.

Some of the advantages of having international trade are enumerated below:

• Facilitates economic growth: International trade brings about global competitiveness that enhances the efficiency of domestic market as they can make use of latest technology and expertise.
• Utilize profuse resources: Some countries are endowed with certain resources while there are other countries that have limited access to these resources. International trade has brought together these nations that could sell excess resources to the countries that need them, thereby making efficient use of resources.
• Countries gain from international trade: Corporations could export those goods that are available in abundance and import scarce ones. As such; they could make much more profits as compared to selling already abundant goods in the home country.

Conclusion

Therefore, it can be said that international trade has positively influenced global economy by bridging the gap between developing and developed nations.