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alexeconomics.org - Over the years the economy of the...

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Over the years, the economy of the United States of America has become enhanced in my opinion more through having utilized methods fewer restrictions on trade (i.e. using techniques of free trade). The definition of the policy of free trade is as follows: free policy is the unhindered movement of goods and services across national boundaries. The principle of free trade is a method that is employed by many individuals and countries because people and nations can benefit from what other groups of people and countries are specializing in production and exchanging them as a result. If various people and countries were to become self-sufficient, then the result would most likely be that they would become poor because of the fact that they essentially could not export (or sell to others any parts of their production) nor could they have the abilities to import (or buy from others anything that they have produced). As a result of employing self sufficient methods, the quantity of production would therefore be considered to be too small and consequently also poor in quality. For example if a country were to become self sufficient, then that country would lack the necessary inputs that their productions would ultimately need which would therefore result in the goods being produced inefficiently. In short since the United States has employed free trade methods for its economy, the United States has been able to produce better quality products because of the imported goods that they have received from other countries as well as enabling other countries to better themselves economically by allowing them to receive exported goods from us. There are many short-term and also long-term advantages for the economy of the United States for when they employed free trading methods with other countries in the world. Some of the short-term advantages that have become beneficial for the United 1
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States is that the United States has had an absolute advantage in the goods that they have produced in the past when exporting them to other nations. When a country has an absolute advantage, it means that they can produce a good (or goods) by utilizing fewer resources than another country. Thus, the economic welfare of the United States would improve because it would specialize in the production of goods which they had an absolute advantage and exporting them to other countries whereas the United States would receive imported goods from other nations that would therefore have an absolute advantage in those goods. On the other hand another beneficial short-term factor for free trade would be comparative advantage in the goods that they have produced in the past when exporting them to other nations. When a country has a comparative advantage, it means that they can produce a good (or goods) at a lower opportunity cost than another country. Therefore, the welfare of the economic status of the United States would drastically improve over time because it would essentially save money for the United
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This note was uploaded on 08/21/2009 for the course ECON 110 taught by Professor Donaldbrown during the Fall '06 term at Yale.

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alexeconomics.org - Over the years the economy of the...

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