Macroeconomics 111 - Chapter 21

Macroeconomics 111 - Chapter 21 - CHAPTER 21 International...

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CHAPTER 21 – International Trade Restrictions - Governments often find political reasons to favor policies that restrict trade -Government policy aimed at influencing international trade flows is called commercial policy - Protection from foreign competition generally benefits domestic producers at the expense of domestic consumers Arguments for Protection -Creation of domestic jobs, creation of a “level playing field”, government revenue creation, national defense, infant industries, strategic trade policy Creation of Domestic Jobs -Assumes that domestic producers will produce the goods that otherwise would have been produce abroad, giving jobs to domestic workers instead of foreign workers -Unfortunately, only the single industry involved is helped -Domestic consumers will pay higher prices for the good involved, thereby having less income to spend on other goods -This reduces the expenditure in all other industries -Lowers the standard of living for consumers -The result is that jobs are not saved, but simply redistributed across industries
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Macroeconomics 111 - Chapter 21 - CHAPTER 21 International...

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