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How can increased trade affect an economy??

How can increased trade with countries like china affect an economy??

Increase the trade deficit, increase domestic unemployment (maybe), gives consumers more choice and cheaper goods, currency depreciation (maybe)...

Reply 2

bonana567

yes, what Xela said. Would most likely drive down prices if there was to be healthy competition. Might also want to consider the effects of domestic trade vs international trade

Reply 3

turn and fall

Theories of David Ricardo and Adam Smith of compartive, absolute advantage and specialisation say that trade makes everyone better off.

Trade for everyone is good in the longterm. However it may not serve the individual nations interests i.e protectionism.

Protectionism in the long term is almost invariably bad (except in Japan) for example crappy American cars.

Reply 4

bookaholic

Original post by Wellsy1210

How can increased trade with countries like china affect an economy??

Low-wages in China lead to low total costs. Therefore, they can sell the goods at lower prices that that of the producers around the world.

This makes it harder for the producers in other countries to compete with Chinese goods. An increase in trade with china would lead to:

(a) A fall in the demand for domestic products.
(b) This forces the producers to bring down their price.
(c) Bringing down the price will likely lead to huge loss.
(d) This will lead to a shut down and failure of many domestic firms.
(e) GDP will be affected and the country might face a trade deficit.

Regards,
Pradeepthi Bommidala.