Why trade with other nations?
Advantages
International trade leads to more efficient and increased world production, thus allowing countries (and individuals) to consume a larger and more diverse bundle of goods.
Balance of Payments The balance of payment = the difference between money coming into a country and money going out of the country + money flows coming into or leaving a country from other factors. favorable balance of payments VS unfavorable balance of payments
A nation possessing limited natural resources is able to produce and consume more than it otherwise could.
the establishment of international trade expands the number of potential markets in which a country can sell its goods.
Because the balance of payments is one reflection of a nation's financial stability in the world market, the International Monetary Fund (IMF) uses these accounts to make decisions such as qualifying a country for a loan. The IMF also provides the information to its members so that they can make informed decisions about investments and trade.
