Analysis Of Implicit Assumption Of Ricardo's “2×2” Model

More and more economies have been gradually changing from supply-constrained macroeconomic situation to demand-constrained macroeconomic situation since World War?.The premise of the classical economics theory have become unfitted for the current market conditions.Therefore,some theories and models that are initially valid become invalid when dealing with the economic analysis in demand-constrained macroeconomic situation.Any economic theory is from rigorous logic reasoning to the effective conclusion,basing on certain assumptions.It is critical to select a appropriate theoretical framework to do research according to the premise.This paper firstly discusses the implicit assumptions of 2×2 Model from the perspective of aggregate demand and aggregate supply.It is considered that the 2 × 2 Model is effective in the supply-constrained macroeconomic situation,and invalid in the demand-constrained macroeconomic situation.The 2×2 Model have another three implicit assumptions--supply-constrained macroeconomic situation,Standard market economy and free from the threat of war between countries.Only on these conditions the comparative cost theory conforms to the history and logic.With the major economies have entered the demand-constrained macroeconomic situation,the premise of the 2×2 Model has changed.It makes the comparative cost theory unable to guide international specialization and international trade.Moreover,absolute advantage theory is truly effective to guide international trade.