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Investment
Investment and Trade Theories
Lecture # 2
182bus685.2
Summer 2018
The importance of Foreign Trade and Foreign Direct
Investment
http://data.worldbank.org/indicator/T
G.VAL.TOTL.GD.ZS/countries/
Direction of Trade
70% of exports from developed economies go
to other industrialized nations, not to
developing countries.
Major Trading Partners: Their
Relevance for Managers
Mercantilism
◦ the economic theory that trade generates wealth
and is stimulated by the accumulation of profitable
balances, which a government should encourage by
means of protectionism. Govt. policies should
promote
exports
and
discourage
imports
Theory of Absolute Advantage
The Market
Force
Invisible Hands
Theory of Comparative Advantage
Ricardo’s
Comparative
Advantage Theory
◦ Absolute disadvantage
in production
◦ More efficience
Other direction
How money can change the direction of trade
◦ Exchange Rate
◦ Currency devaluation
investment
Annual outflow of FDI