Question

1. Explain why the Stolper-Samuelson theorem predicts that owners of capital in the USA would prefer free trade. Then explain why we actually observe examples of capital owners in the USA advocating protectionism. ( maximum word limit: 250 words)

Answer 1

ANSWER :-

☆ Stolper-Samuel Theorem  and USA Trade:

●Stolper-Samuelson Model of global trade set forward the connection between variables of creation and the general cost of the ware. An expansion in the overall cost of the ware will build the profits for the escalated calculate utilized the creation of that product and diminish the profits for different elements.

● As the theorem  recommends, capital concentrated products as it increment its relative cost, the arrival for the factor capital will increment and that of different variables will lessen.

●USA being a capital serious nation, the hypothesis recommend USA capital proprietors will pick facilitated commerce in light of the fact that an ascent in the overall cost of the capital exceptional positive attitude give expanded comes back to the factor capital.

● The capacity of USA to create capital serious products less expensive than others will give them the advantage of high relative cost on the planet advertise in this way giving expanded comes back to the factor capital.

●The free market circumstance prompted the gracefully of innovation and different elements to various markets everywhere throughout the world. Different nations which are work escalated, began to deliver capital serious merchandise much less expensive than US with the upside of facilitated commerce.

●Since USA come up short on the important work gracefully, work is the costly factor of creation there. Nations which can create with modest work through expanded innovation and free trade commerce could accomplish capital additionally less expensive.

● USA capital proprietors think that its hard to contend with nations those get advantage from free trade commerce.

● They lose the benefit of capital power and along these lines holding the factor from gaining better returns.

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