Yeoju technical institute in tashkent department of economics discipline of


The International Flow of Goods, Services



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The International Flow of Goods, Services, 
Labor and Capital

Gravity Model

Other things equal, the bilateral trade between 
two countries is proportional, or at least 
positively related, to the product of the two 
countries’ GDPs, and the greater the distance 
between the two countries, the smaller is their 
bilateral trade.

That is, the larger (and more equal in size) and 
the closer two countries are, the larger the 
volume of trade between them is expected to be.
Salvatore: International Economics, 11th Edition © 2013 John Wiley & Sons, Inc.


Salvatore: International Economics, 10th Edition © 2013 John Wiley & Sons, Inc.


The International Flow of Goods, Services, 
Labor and Capital

The International Flow of Labor and Capital

About 190 million people live in a country other 
than where they were born.

Migration is primarily for economic reasons, 
although nations place many restrictions on 
migration.

In general, capital flows more freely than labor, 
particularly financial capital.
Salvatore: International Economics, 11th Edition © 2013 John Wiley & Sons, Inc.



International Trade Theory

Analyzes the basis of and the gains from 
international trade.

International Trade Policy

Examines the reasons for and the effects of 
restrictions on international trade.
International Economic Theories and Policies
Salvatore: International Economics, 11th Edition © 2013 John Wiley & Sons, Inc.


17

Deep financial and economic crisis

Trade protectionism in advanced countries

Excessive fluctuations and misalignments in 
exchange rates and financial crises

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