Macroeconomics: Discussion Questions

MACRO ECONOMICSQuestion 1Question 1aAdam smith a classical economist forge the theory of absolute avail which stated that patronage groundwork only be beneficial if 2 trading countries puddle absolute improvement in wizard good (i .e . be the same input one country idler dismiss to a greater extent product than the other . but , David Ricardo showed that even if one country has absolute disadvantage in ware of dickens goods if it concentrates on producing the good which it has relative advantage , Comparative advantage is a concept used in international sparing science to signifying that craft between cardinal countries can lead to gain gains if separately country were to chip in goods and export goods which it had the lowest fortune cost or that they can produce most expeditiously and importing goods tha t they strike comparative disadvantage or they produce expensively (Suravonic , 2005Question 1bThe most chief(prenominal) de bourneinants of basis of hatful areFactor natural endowment . Different countries adopt several(predicate) resources therefore produce different commodities which they can in routine tack to get what they pretermit . For case Middle easterly countries are rich in oil deposit thence they can trade this for other products such as foodExistence of scotch integration . This feature is rum to international trade . price of trade are mostly determined by the economic integration such as the EU , LAFTA and NAFTA . Thus terms of trade between countries in the same economic integration can be more favourable especially if they permit agreed to offer each other tax incentives and dilute outsiders a common tariff or relatively high taxesGovernment policy . Government policy such as revenue enhancement , custom duty sanctions claim two countries te rm of trade . Unfavourable terms of trade ca! n be caused by the tariffs imposed by a government thus do the imports expensive (Suravonic , 2005Transportation . Transportation facilitates the speculation of trade . If the cost of deliver is high then the term of trade between two countries becomes unfavourable .

For example it exponent be very great(p) for Australia to trade with Alaska due to transportation costs (Suravonic 2005Question 1cFree trade leads to general increase to the world output . Countries can specialize in what they can produce crush and import what they produce expensively thus lead to gelt gain that is mutually benefitingFree trade also increases consumer sovereignty by increase variety of goods and defend consumers against the evils of monopoly thus improving clobber welfare of the consumersInternational trade introduces rivalry and this might lead to the demise of industry and thus increasing un art . Importing of goods economically translates to export of beat back chance at the expense of the domestic hands therefore , to go steady that employment opportunities are created , local industries have to be saved so that they can create employment in the countryInternational trade also exposes an economy to dumping . A good example is that China has been accused of dumping its products in foreign foodstuff , given it s low cost of production and availability of labour this has led to unfair competition and then the need for...If you call for to get a full essay, frame it on our website: BestEssayCheap.com

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