Question

Between 1980 and 2014, income inequality in the United States has increased in part due to expanding international trade. How does expanding international trade contribute to income inequality?

Select one or more:

a. It allows producers to exploit workers and reduce the wages they are willing to pay workers.

b. It raises the cost of producing goods and therefore lowers the value of labor's services.

c. It increases the demand for a wide array of products which in turn increases prices beyond the reach of average-income individuals.

d. Domestic firms can now hire low-skilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of unskilled workers to be depressed relative to the wages of other workers.

Answer 1

Expanding international trade contribute to income inequalities in US.the reasons are discussed below...as in the question its said to select one or more given options.so i have selected 2 options to be correct .they are option A & D .

Reasons is discussed

OPTION A & D CORRECT - Explanation of A

With the expansion of international trade it allows the movement of foreign labours which allows producers to charge the wages they are willing to pay thus,it reduces the wages for american born high school dropouts which leads to income inequalities.

Option D is also correct as with the expansion of international trade.domestic firma can hire less skilled workers which has entered due to international trade...which means american workers have been losing ground in face of competirion from workers in Asia and other emerging economies.

Option B is incorrect as international trade leads to producing those goods whose cost is less inorder to get benefit from the trade. it includes the production of those goods with lower prices and better products for consumers.

OptionC is incorrect as the demand will increase when the prices are low and the quantity also increases with that.increase in demand with increase in prices cannot go together as demand will increase with the fall in price vice versa ....so this option is incorrect as demand increases and price increase and beyond the reach of average income individuals.

To conclude,we can say that expansion of international trade leads to income inequalities in US as the domestic firms can hire foreign labours which reduces the demand of american labour class and they can charge the wages to the workers as per their will.so it leads to income inequalities in US