Explain the relation between trade and world output
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Explain the relation between trade and world output. Describe the broad pattern of international trade. If the nations world were to suddenly cut off all trade with one another, what products might you no longer be able to obtain in the US? Choose one other country and identify the products it would need to do without.
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Explain the relation between trade and world output.
Trade output is affected by world output, in a supply and demand type of relationship. If the world output is low in any given year, then the trade output will be low as well. In times of economic recession, or catastrophe for that matter, people will not purchase as many products as they would if comfortable about their financial and personal future. Also, if in times of recession, a country's currency may be weakened in value, making imports from other countries much more expensive. (Wild, Wild, Han. 2005, Ch.5)
Thus, the trade and world output are positively correlated in the sense that increase in one leads to increase in another and vice versa. However, the pace of increase or decrease may not be the same. For example, Between 1980 and 2002, world trade has more than tripled while world output has 'only' doubled. The rise in trade relative to output is common across countries and regions, although the relative growth in trade and output varies greatly.
source: http://www.bankofengland.co.uk/publications/quarterlybulletin/qb040304.pdf.
One other reason that Trade and World Output are so closely ...
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