Lecture 4

Lecture 4 - ECN 211 Macroeconomic Principles L27...

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Unformatted text preview: ECN 211 Macroeconomic Principles L27 Protectionism and Welfare Analysis of Free Trade. Trade If countries specialize in the goods in which they have a comparative advantage then there are potential gains from trade Total World Output can increase However in most countries that trade internationally there are some forms of protectionism When domestic industries are protected from World market forces Domestic producers tend benefit at the expense of domestic consumers Invalid Arguments for Protection Creation of domestic Jobs Many people argue that protectionism saves jobs May be true for protected industry Cost of protectionism exceeds the benefits for the economy as a whole Cost to the US economy can vary from $500,000 to $1m per job. Creation of a level playing field Foreign firms have different business environments. Argue that domestic policymakers should react to foreign restrictions with those of their own Often called a tit for tat strategy. Government revenue creation...
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Lecture 4 - ECN 211 Macroeconomic Principles L27...

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