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Chapter 21: Q.7 (page 522)

How do trade barriers affect the average income level in an economy?

Short Answer

Expert verified

Prices would increase, while workers would earn lesser wages.

Step by step solution

01

Step 1. Meaning

Trade barriers – trade barriers are tariff and non-tariff barriers, through which trade becomes more difficult and expensive between countries.

02

Step 2. Explanation

Trade barriers affect negatively the average income level in an economy because of trade barriers the prices of goods & services would be higher for the population & due to the same, the worker would earn less.

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Most popular questions from this chapter

Trade has income distribution effects. For example, suppose that because of a government-negotiated reduction in trade barriers, trade between Germany and the Czech Republic increases. Germany sells house paint to the Czech Republic. The Czech Republic sells alarm clocks to Germany. Would you expect this pattern of trade to increase or decrease jobs and wages in the paint industry in Germany? The alarm clock industry in Germany? The paint industry in the Czech Republic? The alarm clock industry in the Czech Republic? What has to happen for there to be no increase in total unemployment in both countries?

Who gains and who loses from trade?

Why might the unsafe consumer products argument be a more effective strategy (from the perspective of the importing country) than using tariffs or quotas to restrict imports?

An economic union requires giving up some

political autonomy to succeed. What are some examples of political power countries must give up to be members of an economic union?

Why do you think that the GATT rounds and,

more recently, WTO negotiations have become longer and more difficult to resolve?
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