Take-Home Final Exam Juniata College EB 223 01 EB105: Int’l Economic Issues You must answer these questions: 1) Pick any two topics from this course that the public at large and economists have different opinions of. Why does this difference of opinion exist? Now describe any international economic topic covered in class that you think was glossed over, ignored or not paid sufficient attention to by the readings or by me. What are my profession (and me) missing? One topic that the general population and economists view differently is globalization. The general population tends to view globalization as a bad thing, but economists favor globalization. According to LeGrain, there are two main reasons that the general population fear globalization. …show more content…
The general population, see free trade as a potential threat to domestic workers and a dependency on other countries for goods and services. Economists however, see free trade as an essential tool for a country to increase capital. Economists feel that everyone mutually benefits from free trade, because countries can specialize in goods and services that they have abundant resources for and import goods and services that they cannot make as efficiently domestically. This is also known as comparative advantage. Economists and the general population disagree on this topic, because the general population wants to buy domestically and support domestic workers instead of rely on other nations for goods and services. Economists however, know that producing everything domestically would be very cost ineffective and nearly …show more content…
It is important to understand the global trade markets and to be able to engage in economic discourse. This course is an introductory course to international economic issues that emphasizes the importance of international trade to global economy. A main key point that we learned from this course is that free trade mutually benefits everyone. Another key take away from this course is that globalization is the ties that bind countries of the world together not only economically, but also politically and culturally (LeGrain, 2002, p.
Brue, S. L., Flynn, S. M., & McConnell, C. R. (2011).Economics principles, problems and policies. (19 ed.). New
The United States has for over two centuries been involved in the growing world economy. While the U.S. post revolutionary war sought to protect itself from outside influences has since the great depression and world war two looked to break trade restrictions. The United States role in the global economy has grown throughout the 20th century and as a result of several historical events has adopted positions of both benefactor and dependent. The United States trade policy has over time shifted from isolationist protectionism to a commitment to establishing world-wide free trade. Free trade enterprise has developed and grown through organizations such as the WTO and NAFTA. The U.S. in order to obtain its free trade desires has implemented a number of policies that can be examined for both their benefits and flaws. Several trade policies exist as options to the United States, among these fair trade and free trade policies dominate the world economic market. In order to achieve economic growth the United States has a duty to maintain a global trade policy that benefits both domestic workers and industry. While free trade gives opportunities to large industries and wealthy corporate investors the American worker suffers job instability and lower wages. However fair trade policies that protect America’s workers do not help foster wide economic growth. The United States must then engage in economic trade policies that both protect the United States founding principles and secure for tomorrow greater economic stability.
Few governments will argue that the exchange of goods and services across international borders is a bad thing. However, the degree to which an international trading system is open may come into contest with a state’s ability to protect its interests. Free trade is often portrayed in a good light, with focus placed on the material benefits. Theoretically, free trade enables a distribution of resources across state lines. A country’s workforce may become more productive as it specializes in products that it has a comparative advantage. Free trade minimizes the chance that a market will have a surplus of one product and not enough of another. Arguably, comparative specialization leads to efficiency and growth.
Nowadays, Globalization is a main trend for the world economic. The world’s economy has become fully integrated. There are no barriers and borders to trade around the world.
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
2. Globalization and international trade, capital and production (Augustin Kwasi Fosu, 2010) (Gunter and Van der Hoeven,
All nations can get the benefits of free trade by being specialized in producing goods they have a comparative advantage and then trade them with goods produced by other nations in the world. This is evidenced by comparative advantage theory. Trade depends on many factors, country's history, institution, size and. geographical position and many more. Also, the countries put trade barriers for the exchange of their goods and services with other nations in order to protect their own company from foreign competition, or to protect consumers from undesirable products, or sometimes it may be inadvertent.
The Law of Comparative Advantage was introduced by David Ricardo in 1817 in his book ‘Principles of Political Economy and Taxation’. According to this classical theory, a comparative advantage exists for a country when it has a margin of superiority in the production of a certain commodity over others. Comparative advantage results from differing endowments in the factors of production like technology, natural endowments, climate, etc. among different countries. Therefore, each country exports the commodities which it can produce at a lower opportunity cost or, in other words, lower marginal cost of production and imports the rest. This would ultimately be beneficial for all countries engaging in free trade as each would gain through its specialization
Free trade is a form of economic policy which allows countries to import and export goods among each other with no government interference. In recent years there has been a general consensus in economist’s stance on free trade. They view free trade as an asset. Free trade allows for an abundance of goods with increased varieties and increased availability. The products become cheaper for consumers and no one company monopolizes an industry. The system of free trade has been highly controversial. While free trade benefits consumers it has the potential to hurt manufacturers and businesses thus creating a debate between supporters of free trade and those with antagonistic positions.
In order for international trade to work well, governments must allow the world market to determine how goods are sold, manufactured and traded for all to economically prosper. While all nations may have the capability to produce any goods or services needed by their population, it is not possible for all nations to have a comparative advantage for producing a good due to natural resources of the country or other available resources needed to produce a good or service. The example of trading among states comprising the United States is an example of how free trade works best without the interve...
Free trade can be defined as the free access to the market by individuals without any restriction or any trade barriers that can obstruct the trade process such as taxes, tariffs and import quotas. Free trade in its own way unites and brings people together. Most individuals love the concept of free trade because it gives them the ability to move freely and interact with the market. The whole idea of free trade is that it lowers the price of goods and services by promoting competition. Domestic producers will no longer be able to rely on government law and other forms of assistance, including quotas, which essentially force citizens to buy from them.
Tragakes, E. (2012). Economics for the IB diploma (2nd ed.). Cambridge, UK: Cambridge University Press.
The global economy needs free trade. Countries need free trade. Trade with other countries occurs at some level in every country globally. There may be some indigenous tribes within some countries that can lay the claim that they are self-sufficient, however, there is not a single country that can say the same. Proponents of an open trading system contend that international trade results in higher levels of consumption and investment, lower prices of commodities, and a wider range of product choices for consumers (Carbaugh, 2009, p26). Free trade is necessary. How do countries decide what to import and what to export?
Globalization has a tremendous amount of support as well as a tremendous amount of opposition. While multinational companies tend to push for globalization and therefore higher profit margins, opponents work hard to make sure that developing nations are not taken advantage of in the process. Globalization cannot continue without supporters and it should not continue with out detractors. As always a balance must be found to protect not only the nations that are developing but those that are already developed as well. Proponents and opponents must work together to ensure the well being of generations to come that will surely inherit the earth.
Free trade is a policy that relies on the concept of comparative advantage that when comparing two countries one of those countries will have the capability to make a product that is better than the other country. So it is best if each country focuses its efforts and resources into one product to increase the economic activity for both countries. The determination of who produces a product better is based on the open market without intervention from a government who may try to control a trade by imposing government protective measures such as tariffs. The World Trade Organization has been tasked with monitoring free trade, but it has been noted that their policing has not been effective to stop such interventions. Free trade not only relies on a laissez-faire approach but also on assumptions of conditions. The assumptions used by many for economic theories are not always accurate but rather the justification for using the assumptions is so that economic theories can be applied for the greater good of an economy.