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International Economics

Trading Blocs

Trading blocs are a formal agreement between two or more regional countries that remove trade barriers between the countries in the agreement while keeping trade barriers for other countries. Types of Trading Blocs 1. Free Trade Area Two or more countries form a Free Trade Area in which trade barriers between the countries are abolished…
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Purchasing Power Parity

Purchasing Power Parity (PPP) is a theory that says that in the long run (over several decades), the exchange rates between countries should even out so that goods essentially cost the same in both countries. The Purchasing Power Parity theory explains that there should be no arbitrage opportunities (where price differences in countries can…
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Advantages of Free Trade

Trade around the world is becoming increasingly barrier-free, but there are still many people who think that free trade is bad for the economy. They believe that free trade hurts domestic production, while that may be true, the advantages of free trade lead to increased competition which means better quality products at a lower price for end…
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Introduction to the Bill of Exchange

A bill of exchange is a specialized type of international draft used to expedite foreign money payments in many types of international transactions. In addition, a draft is commonly used in the U.S. while a bill of exchange is primarily used outside the U.S. A negotiable instrument is a signed writing, containing an unconditional promise or…
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