Question

In: Finance

“We should buy American goods to support America and American workers.” Discuss this statement. How does...

“We should buy American goods to support America and American workers.” Discuss this statement.

How does the law of comparative advantage relate to the benefits of international trade?

Solutions

Expert Solution

'We should buy American goods to support American American workers'this is statement which advocates that a citizen should always try to focus more onto the domestic goods in order to support the economy because when one supports by buying the domestic goods it means that it it will lead to increase in the revenue of domestic company, and it will also mean that it will generate employment for domestic workers and it will have the multiplier effect by overall increasing Gross Domestic product.

In the context of International Trade, it is always helpful by lowering the trade deficit because when we are buying lot more products than other countries from America itself, it will increase the demand for made in United State products.

it will also mean that you are supporting the chain reaction of positive effect because every good it is made in United States support the national economy. It will increase the money flow into the country and keep the employment rate at high

Competitive advantage in international trade means that when a country produce a good or service for lower opportunity cost than other countries, it will have a competitive advantage and the benefit of buying the goods or services of this country will be huge.this could be exampled through India's call centre because United State companies buy this service, because it is cheaper than local call centres in America and it is why it offers with the cost advantage because they are cheaper.

Competitive advantage can be distinguished as they are low cost providing strategies and they have the advantage of offering a better product or service and they can only focus on one type of customers . it will affect international trade as those countries who have a competitive advantage will always generate a higher revenue because of low pricing of its service.


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