In the aggregate trade model, we showed that gains can be made from international trade. Exactly...

In the aggregate trade model, we showed that gains can be made from international trade. Exactly how does this work-that is, what are the gains exactly?

Draw a graph that shows gains from trade (PPF and SIC graph). Draw your graph so that, when trade opens, production increase for the good on the vertical axis.

Solutions

Expert Solution

Gains from trade :

It is the net benefits obtained by economic agents when they engage in free international trade . They are the increase of consumer and producer surplus when liberalized trade is practised . International trade increases national income . This is one of the gains from purchasing low priced imports . Another gain can be measured by looking at the TOT (terms of trade) . The gains can be achieved due to exchange and specialization .

Rahul Sunny answered 1 year ago

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