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Flow of Trade

Definition

The movement of goods and services from one place to another, often across borders, which is driven by supply and demand.

Analogy

Think of the flow of trade like a busy highway. Cars (goods) are constantly moving from one city (country) to another based on where people need or want them most. Just as traffic can be affected by road conditions or regulations, trade can be influenced by factors such as tariffs, trade agreements, and economic stability.

Related terms

Tariffs: These are taxes imposed on imported goods. They're like toll booths on our highway analogy - they make it more costly for cars (goods) to reach certain destinations (countries).

Supply and Demand: This is the basic principle that price is determined by how much of something is available (supply) and how much people want it (demand). It's like deciding where to drive based on gas prices and the number of open lanes.

Trade Agreements: These are deals between countries to reduce barriers to trade. Imagine if several cities along our highway decided to remove all their toll booths - that would make travel easier and faster!