i. Stimulate exports and export more goods than import. This approach will provide the gold inflow;
ii. Restrict the importation of goods, especially luxury goods that will provide export balance of trade;
iii. Forbid the production of the final products in its colonies;
iv. Forbid the exportation of raw materials from the parent states to the colonies and allow free importation of raw materials, which are not obtained within the country;
v. Stimulate an export of mainly cheap raw commodities from the colonies;
vi. Forbid any trade of its colonies with other countries, except the parent state, which can resell the colonial goods abroad by itself.

1. There are only two nations and two commodities (2 x 2 model)
2. Labour is the only element of cost of production.
3. All labourers are of equal efficiency
4. Labour is perfectly mobile within the country but perfectly immobile between countries.
5. Production is subject to the law of constant returns
6. Foreign trade is free from all barriers.
7. No change in technology.
8. No transport cost.
9. Perfect competition.
10. Full employment.
11. No government intervention

Factors determining exchange rates are,
(i) Differentials in Inflation
(ii) Differential in Interest rates
(iii) Current Account Deficits
(iv) Public Debt
(v) Terms of Trade
(vi) Political and Economic Stability
(vii) Recession
(viii) Speculation

(i) Availability of variety of goods for consumption.
(ii) Generation of more employment opportunities.
(iii) Industrialization of backward nations.
(iv) Improvement in relationship among countries.
(v) Division of Labour and specialisation.
(vi) Expansion in Transport Facilities.