International Trade Promotes Economic Growth

A detailed Summary of International Trade Promotes Economic Growth

EXPLAIN THE WAYS IN WHICH INTERNATIONAL TRADE PROMOTES ECONOMIC GROWTH

DISCUSS THE ARGUMENTS FOR TRADE LIBERALISATION AND AUSTRALIA'S STANCE ON THIS TOPIC

EXPLAIN THE PRINCIPLE OF COMPARATIVE ADVANTAGE AND ITS LIMITATIONS

International trade promotes economic growth through higher levels of real income, greater consumption and higher living standards. It can expand a nation's consumption possibilities by providing access to other countries' production through imports. In addition, the exports of a country allow payment for the imports a country needs to enjoy a high standard of living. International trade also permits specialization, economies of scale, increased productivity and higher real incomes. For these reasons and many others, there is a strong link between international trade and economic growth.

International trade benefits nations because:

· Every country lacks some vital resource which they can on

International trade is based on the theory of comparative advantage and competitive markets. Comparative advantage refers to a country's advantage in producing a good in relation to another country. Countries gain when they specialise in producing the goods and services they can produce at a lower opportunity costs then other nations. For example if:

However, this model of comparative advantage assumes that transport and storage costs would be zero. In the real world, transport and storage costs are an important factor influencing trade decisions because it can affect a country's comparative advantage. Another limitation of this model is the unrealistic assumption that resources could be transferred from one industry to another without any costs. Obviously the resources used to make wheat is different to that used to make clot

· Specialization enables increasing efficiency via economies of scale, and as a result

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Approximate Word count = 621
Approximate Pages = 2 (250 words per page double spaced)

Category: History

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International Trade Promotes Economic Growth

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