Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?
What will be an ideal response?
The analysis is identical. If nations and persons benefit from specializing where they have comparative advantage (derived from whatever source), then states within the United States also benefit. In fact, the United States as the world’s first free trade zone is the strongest evidence that can be offered that free trade benefits all participants.
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According to David Ricardo, an increase in government spending without any tax increase will not increase aggregate demand because
A) consumers will increase their consumption proportionately more than Keynesian economists believe they will. B) consumers will save less than they otherwise would have. C) consumers will consume less and save more to prepare for increased taxes in the future. D) the private sector is more likely than the public sector to spend any extra income on national defense.
Based on the following information, what is the amount of public saving? ReceiptsExpendituresFederal Government2,5002,000State and Local Governments1,5001,500
A. +2,500 B. -300 C. +200 D. +3,700
Since the end of World War II, the economy of the United States has been more influenced by stabilization policy. One of the undesirable side effects of this has been that the economy now has a greater tendency to suffer from
A. more severe recessions and depressions. B. higher levels of unemployment and lower rates of employment growth. C. lower rates of growth in real and nominal GDP. D. more persistent periods of inflation.
Which of the following is not characteristic of U.S. agriculture?
A. Productivity has been increasing more slowly in agriculture than in the rest of the economy. B. The demand for agricultural commodities increases less than proportionate to increases in income. C. Resources in agriculture are relatively immobile. D. Demand is inelastic with respect to price.