Free Trade

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  • Free Trade
    • Employment
      • With reduced trade barriers, a countries export may increase. Increase in output means increase in production
        • Increase in production will increase the demand for labor, meaning a potential decrease in unemployment
          • Employment
            • With reduced trade barriers, a countries export may increase. Increase in output means increase in production
              • Increase in production will increase the demand for labor, meaning a potential decrease in unemployment
              • Employment could decrease due to firm imports goods instead of internaly producing them
              • Structural unemployment caused if an over specialised industry collapses
        • Employment could decrease due to firm imports goods instead of internaly producing them
        • Structural unemployment caused if an over specialised industry collapses
      • BOP
        • Free trade involves countries specializing in production where they have a comparative advantage
          • Comparative Advantage: where one country has a lower opportunity cost of a good than another (independent of total output)
            • BOP
              • Free trade involves countries specializing in production where they have a comparative advantage
                • Comparative Advantage: where one country has a lower opportunity cost of a good than another (independent of total output)
                  • Different countries specializing in their comparative advantage increases world output
              • If a countries specialized good is in high demand,they will see an increase in exports and so an improvement in thier BOP
              • However, If the population of a country have a high demand for another countries specialized good, first countries imports will increase so deterioration of BOP
            • Different countries specializing in their comparative advantage increases world output
        • If a countries specialized good is in high demand,they will see an increase in exports and so an improvement in thier BOP
        • However, If the population of a country have a high demand for another countries specialized good, first countries imports will increase so deterioration of BOP
      • Living Standards
        • Increase in world output will cause a welfare gain increase and hence an increase in standard of living
        • Producing goods more efficiently means lower prices for consumers, again increasing standard of living
        • Infant industries yet to benefit from EoS will not be able to stay competitve in the competition of free trade (without subsidization)
        • Unemployment

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