What is an absolute advantage Why does it result in more global trade quizlet?

The benefits and costs of increased trade, in terms of its effect on wages, are not distributed evenly across the U.S. economy.

The cost of saving jobs through protectionism is usually much higher than the average salary of workers in the protected industry.

If a protected product is a key input for other unprotected industries, those firms will lose sales and, therefore, jobs.

Low-wage U.S. workers suffer due to protectionism in all industries, even those in which they do not work.

Protectionism costs jobs in unprotected industries because consumers are paying higher prices to the protected industry and have less money to spend on goods from other industries.

When an industry is protected, the economy as a whole loses the benefits of playing to its comparative advantage.

The wages of low-skilled workers who hold service jobs are less dependent on international trade than the wages of those who work in production industries.

Protectionism saves jobs in the specific industry being protected, but it costs jobs in other unprotected industries.

International trade causes the average level of wages in an economy to rise.

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This involves the government reducing it's role in the economy, by providing minimal levels of services, reducing taxes and regulations and removing tariffs.
1) No tariffs (free trade) will enable the developing country, through comparative advantage, to specialise in goods where they have a lower opportunity cost, this will lead to lower prices and increased economic welfare.
Evaluation: Free trade may mean developing economies focus only on primary products; this may limit development in the long term, as well as risking dependency on these products. Primary products (commodities) have very volatile prices, therefore a large fall in the price could lead to fall in exports, and so AD, hurting growth, Zambia running a current account deficit, and rising structural unemployment.
2) Low taxes and regulation will improve the efficiency and productivity of a developing economy through increasing the role of market forces. Encouraging private enterprises (multinationals) to come to the country who will bring technology and training to improve the skills of local people increasing the productivity of the economy.
Evaluation: Policies such as deregulation, e.g. reducing protections on environment, may increase inequality and cause environmental problems.
Evaluation: Infant industries argument, not protected may struggle to compete against foreign companies with large EOS, and greater efficiency.

It can be useful for measuring level of economic activity and average incomes to give a rough overview of the development of an economy. However it has many limitations:
- Inequality, GDP per capita ignores distribution of income, some people may be very poor, despite the country being rich. Economic development requires a reduction in absolute and relative poverty.
- Purchasing power parity, comparing countries' GDP in a common currency like the dollar, doesn't give a true comparison since there will be different purchasing power of the local currency, e.g. a dollar would buy more in India than Japan.
- Difficult to measure, difficult to calculate total output of an economy, since GDP statistics will ignore the underground economy, and for poorer countries subsistence farmers who grow their own food may have zero income but actually be well off.
- Negative externalities, GDP growth does't take into account negative externalities such as pollution and congestion, which reduce living standards.

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