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Issues of the Mexican Economy

This research analyzes specific issues related to the economy of Mexico. The issues discussed are (1) per capita gross domestic product (GDP) differentials between Mexico and the United States, (2) the effects of labor on the per capita GDP differential, (3) the North American Free Trade Agreement (NAFTA), (4) the 1994 peso crisis, and (5) the role of the financial structure and system in the peso crisis.

International Trade As An Explanation for Differentials in Per Capita Gross Domestic Product in Mexico and the United States

The basic model of international trade is structured around the concept of comparative advantage. The theory of comparative advantage holds that mutually advantageous trade between countries will always be available, because trade patterns will be based on relative prices, as opposed to absolute prices, which is based on the theory of absolute advantage, wherein mutually advantageous trade between countries might not always be possible (Walther, 1997). The reasoning behind the theory of comparative advantage is that no single country can have comparative advantage in all commodities. Initially, the theory was based on labor-cost differentials. In the 1990s, it is recognized that both supply and demand factors are at work in the determination of relative prices which establish a basis for a mutually advantageous exchange between countries. In spite of significant changes in economic thought since the eighteenth century, the theory of comparative advantage still stands as an example of sound economic reasoning. Barriers to trade are obstacles which prevent goods and services from moving freely between countries. Most trade barriers are imposed by national governments, although they are most often imposed at the insistence of or with the support of domestic industry and labor organizations. The major formal barriers to international trade are tariffs and quotas. A tariff is an import tax. It is des...

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Issues of the Mexican Economy. (1969, December 31). In LotsofEssays.com. Retrieved 14:04, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1694771.html