Get premium membership and access questions with answers, video lessons as well as revision papers.
For a country to become richer or less poorer, it must increase it production of goods and services by putting to good use its available productive resources. Efficiency in resource use is achieved through specialization. Under specialization an individual an enterprise (farm or factory) or a country tends to work at the occupation for which it is most suitable in terms of training skill, resources, character etc. Through specialization incomes are maximized which can be exchanged for goods and services
produced by other specialists. Specialization then leads to the need for a market in which goods and services can be exchanged. The opposite of specialization is autarky or self sufficiency which are obviously inefficient.
Within the sphere of international trade, it is advantageous for any two or more trading countries in each to produce and supply products which it can produce efficiently and to supply each other through trade. Even if a country has absolute advantage in the production of all its commodities the principle of specialization requires that it concentrate on the product in which its relative superiority in greatest while the other countries concentrate on the product in which their relative inferiority is least. As a result, there will always be an incentive for specialization and trade between countries and even the least efficient producer can gain from trade.
The problems in pursuing comparative advantage are as follows:
a) This doctrine is valid in the case of a classical competitive market characterized by a large number of
informed buyers and sellers and homogeneous products in each market, with world market places
serving as efficiency determinants for global allocation of resources to their most suitable uses.
Unfortunately, world markets and their prices are largely inefficient showing influences of trade
barriers, discrimination and market distortions.
b) Individual countries systematically aim at maximizing their potential gains from trade rather than
with optimizing the allocation of world resources.
Wilfykil answered the question on February 6, 2019 at 13:05
- What is meant by the term international trade?(Solved)
What is meant by the term international trade?
Date posted: February 6, 2019. Answers (1)
- Explain the economic effects of a high rate of inflation(Solved)
Explain the economic effects of a high rate of inflation
Date posted: February 6, 2019. Answers (1)
- What are the major causes of inflation?(Solved)
What are the major causes of inflation?
Date posted: February 6, 2019. Answers (1)
- Define inflation.(Solved)
Define inflation.
Date posted: February 6, 2019. Answers (1)
- Explain what fiscal policy entails.(Solved)
Explain what fiscal policy entails.
Date posted: February 6, 2019. Answers (1)
- To what extent can an economy be supported by deficit – financing?(Solved)
To what extent can an economy be supported by deficit – financing?
Date posted: February 6, 2019. Answers (1)
- Clearly explain the meaning of deficit financing of the national budget.(Solved)
Clearly explain the meaning of deficit financing of the national budget.
Date posted: February 6, 2019. Answers (1)
- Clearly explain the principle functions of taxation(Solved)
Clearly explain the principle functions of taxation
Date posted: February 6, 2019. Answers (1)
- Define taxation.(Solved)
Define taxation.
Date posted: February 6, 2019. Answers (1)
- Briefly explain the types of budgets.(Solved)
Briefly explain the types of budgets.
Date posted: February 6, 2019. Answers (1)
- Clearly explain the role of budgetary management in economic development(Solved)
Clearly explain the role of budgetary management in economic development
Date posted: February 6, 2019. Answers (1)
- Suggest the possible measures that you would implement to contain unemployment problems in your
country(Solved)
Suggest the possible measures that you would implement to contain unemployment problems in your
country
Date posted: February 6, 2019. Answers (1)
- Discuss the main causes of unemployment(Solved)
Discuss the main causes of unemployment
Date posted: February 6, 2019. Answers (1)
- Define the term unemployment(Solved)
Define the term unemployment
Date posted: February 6, 2019. Answers (1)
- Explain the concept of liquidity trap(Solved)
Explain the concept of liquidity trap
Date posted: February 6, 2019. Answers (1)
- How do commercial banks "create credit?? What are the limitations to this credit creation?(Solved)
How do commercial banks "create credit‟? What are the limitations to this credit creation?
Date posted: February 6, 2019. Answers (1)
- A central bank is largely referred by economists as the bank at the apex with monetary authority.
Clearly explain the major functions of a central bank.(Solved)
A central bank is largely referred by economists as the bank at the apex with monetary authority.
Clearly explain the major functions of a central bank.
Date posted: February 6, 2019. Answers (1)
- You are given the following information about the commodity and Money markets of a closed economy
without government intervention.
The commodity market
Consumption function:
C = 50 + 2/5Y
Investment...(Solved)
You are given the following information about the commodity and Money markets of a closed economy
without government intervention.
The commodity market
Consumption function:
C = 50 + 2/5Y
Investment function:
I = 790 – 21r
The Money Market
Precautionary and Transactions demand for
money MDT = 1/6 Y
Speculative demand for money
MDS = 1200 -18r
Money supply
MS = 1250
Determine the equilibrium levels of income and interest rate for this economy
Date posted: February 6, 2019. Answers (1)
- What are the likely effects of an expansionary monetary policy in an economy?(Solved)
What are the likely effects of an expansionary monetary policy in an economy?
Date posted: February 6, 2019. Answers (1)
- Explain the various motives of holding money.(Solved)
Explain the various motives of holding money.
Date posted: February 6, 2019. Answers (1)