adv and disadv to intl trade

Question 1

govt benefits?

Answer 1

1. growth and devt of econ → link to X-M → AEG
2. faster rate of tech advancement → link to PEG
3. price stability → sustained EG → macroeconomic goal
4. greater efficiency → link to CA → more efficient allocation among countries + IEOS to decrease COP → improves AE + PE (respectively)

Question 2

consumer benefits?

Answer 2

1. high consumption possibilities → link to CA → higher QQ → variety + qty
2. gains consumer welfare → link to CA → IEOS → lower COP → lower prices
3. product diversity → greater variety

Question 3

producer benefits?

Answer 3

1. increased profits → link to CA (produce goods w lower opp costs + larger consumer base) → IEOS → lower AC + higher AR → profits

Question 4

disadvantages to govt?

Answer 4

1. EG → over reliance on X-M → disruptions severely affect EG → cons & prod suffer → X-M decrease → real GDP decrease → macro aim not achieved
2. price stability → M dependent counties are vulnerable to import inflation
3. dumping → goes against CA → not AE
4. immobility of resources + unemployment → less efficient indus scaled down → unemployment → unemployed labour may not have skills to get employed in trade → structural unemployment

Question 5

disadvantages to producers?

Answer 5

1. lower profits → greater competition

2. dumping → by foreign firms as predatory pricing (P

Question 6

disadvantages to everyone?

Answer 6

1. env degredation → trade encourages ppl to move to countries w weak pollution controls → decreases nmSOL
2. over dependence on other countries → disruptions severely affect X-M → decrease mSOL