Question

1. Discuss the dangers of trade dependency.

2. Explain mercantilism. What were its major flaws?

Answer 1

1. Emerging markets that share borders with countries are often dependent on their wealthy neighbors The risks of trade dependency become clear when a nation encounters economic recession or political turmoil, which then affects dependent nations.

Export Surplus-The value of a nation's export is greater than the value of that nation's import. Government Intervention-governmental intervention intervenes in export to preserve a trade-level surplus, according to mercantilism, wealth accumulation relies on a trade surplus. First-Mover advantage-Economic and strategic advantage gained by being the first business to join the market. It can play to the company's benefit because it can attract the product's customers and gain accelerated customer loyalty and could take advantage of the percentage of market share it has by being their first. They can also set the barriers to entry into the sector

2. Mercantilism was an economic system of trade that lasted from the 16th to the 18th century. Mercantilism is based on the principle that the world's wealth was stagnant, and thus, by increasing their exports and restricting their imports through tariffs, many European nations attempted to acquire the greatest possible share of that wealth.

Zero sum game-a nation only benefits from trade at the expense of other nations Market potential in colonies was less than it could have been had people there received higher prices for their resource mercantilist colonies restricted potential output and consumption for both colonies and mercantilist nations