International Trade Worksheet

GROUP
Team Leader________________________________ Section_____
Members:__________________________________
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Mini Case Study: “THE MERCANTILIST COUNTRY”
Mercantilism is a bankrupt theory in that it encourages exports but discourages imports. It is based on
the concept that income is earned through exports but that resources and income are traded for imported
goods. The theory suggests that by limiting imports and increasing exports, a country is able to
accumulate a trade surplus and, as a result, wealth and power.
This theory is erroneous, however, because over time an influx of money into the mercantilist country
would result in inflation. These high prices would discourage other countries from purchasing exports
from the mercantilist country and, over time, the mercantilist countries source of income would stagnate.

1. Problem: How do we prevent erroneous transactions of the Mercantilist Country?

2. What will be your courses of actions? Enumerate at least three and give each pros and cons.
a. Minimize human wants, especially luxury goods that can only be obtained from other
countries. This will limit the need of our country to import goods from other countries. Only
import goods when it is highly necessary. The benefits of doing this is that our country will
not be dependent on other countries for goods. Our local market sales will increase and with
this we are also supporting local producers of raw materials. National revenue will increase
as well, which will help our economy grow. The downside of this however, is that our market
and goods will be limited to local products. Local manufacturing costs will also increase as a
result of importing less from other countries.

b.

c.

d.

e.
3. Recommendation. (From your courses of actions choose the one best solution, and justify
why?)