We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Protectionism, Gains from Trade, and Trade Balance Deficits and Surpluses - Essay Example

Comments (0) Cite this document
Protectionism, Gains from Trade, and Trade Balance Deficits and Surpluses Trade is the most important feature of the modern world. It basically means international purchases of goods and services. There can arise deficit or surplus (when exports are higher than imports) or deficit (when imports are higher than exports) in the trade balance of any country…
Download full paper
Protectionism, Gains from Trade, and Trade Balance Deficits and Surpluses
Read TextPreview

Extract of sample
Protectionism, Gains from Trade, and Trade Balance Deficits and Surpluses

Download file to see previous pages... Explanations of concepts: Protectionism, an economic policy, aims at restricting trade between nations. The economic instruments used in this policy are imposition of tariffs, imposition of quota, and many other fiscal measures. Free trade is the opposite of the concept of protectionist policy. It is the openness of the countries in order to achieve gains from trade through mobility of goods and services between nations (Mankiw, 387-411). There are two components of trades, one is export, and the other is the import. There are several gains that a nation can achieve from trade. In terms of economics these gains are measured in terms of the real wage and the relative prices of goods and services being traded. Real wage is measured in terms of the amounts of goods that a worker can purchase. The relative price is the domestic price of a good and service being traded as a ratio of the foreign price of the same good or service. An increase in the real wage and a decrease in the relative price indicate that the gains from trade have been achieved. Trade between two nations contributes to the growth of GDP and GDP rate. In order to measure the contribution of trade components in the GDP, every economy maintains a trade balance accounting of its exports and imports. Whenever the volume of exports appears (measured in terms of money value) to be greater (smaller) than the volume of imports (measured in terms of money value), then there occurs a surplus (deficit) in the trade balance. When they are same, trade remains balanced. But the concept of balanced trade is used as an accounting sense; in practical it is very difficult to achieve balanced trade for any country. Tax Cut and fiscal policy: In 2002, President Bush initiated a fiscal policy of cutting tax rates. The main aim of the tax cut was to raise the volume of private activities within the economy. This is major merit of any tax cut policy, as it raises the disposable income of people and hence demand. It also raises the volume of private savings and hence investment. This is basically the Keynesian view of this fiscal policy (Mankiw, 388-399). This decision caused USA to lose its national income by 1%. This tax cut caused huge budget deficits and defense costs and increased the volume of fiscal deficit (Auerbach). This fiscal policy increases the budget deficit by increasing the demand for imports relative to exports and hence it reduces the volume of stock of foreign currency of the country. For the US economy this has happened. Monetary policy: Monetary policies are taken the monetary authority of the country in order to control the values of the variables like interest rates and output or income of the economy (Mankiw, 390-410). Monetary policy includes open market operations by the government, changes in the repo rates and reverse repo rates etc. All these policies are taken to control the volume of money supply in the economy. An increase (decrease) in the money supply raises the raises (lowers) output and employment, but lowers (raises) interest rates. Money supply is determined by the amount of money in circulation in the economy and by the volume of demand deposits in the economy. Monetary policy can be used to stimulate real GDP in the short run as well as in the long run. Increase in the supply of money can augment the demand for goods and services and hence ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Protectionism, Gains from Trade, and Trade Balance Deficits and Essay”, n.d.)
Protectionism, Gains from Trade, and Trade Balance Deficits and Essay. Retrieved from https://studentshare.org/macro-microeconomics/1438866-protectionism-gains-from-trade-and-trade-balance
(Protectionism, Gains from Trade, and Trade Balance Deficits and Essay)
Protectionism, Gains from Trade, and Trade Balance Deficits and Essay. https://studentshare.org/macro-microeconomics/1438866-protectionism-gains-from-trade-and-trade-balance.
“Protectionism, Gains from Trade, and Trade Balance Deficits and Essay”, n.d. https://studentshare.org/macro-microeconomics/1438866-protectionism-gains-from-trade-and-trade-balance.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
Globalization and the gains from international trade
Subsequently, Samuelson expanded his original theorem and others like Kemp and Kenen validated it (Grandmont & McFadden 1972, p.109). Samuelson’s theorem consolidated the ‘gains from international trade proposition’ (GFITP) that have long been espoused by economists.
6 Pages(1500 words)Essay
Free Trade and Protectionism
The government is not discriminating against the imports or in the other terms they interfere with the imports but it is giving certain freeness to the international trade especially for the import of many trades. Actually it is made to protect the domestic producers or in the other words it is made for the people to be more beneficial by purchasing the imported goods through foreign trade so that the cost of the good becomes cheaper when produced by a domestic manufacturer and purchasing that by the people.
7 Pages(1750 words)Essay
Odean (1998) suggests that securities individual investors sell subsequently outperform those they buy. Moreover the amount of trading cost is higher by overconfident investors, thus leading to a decline in net realization. Gervais and Odean (1998) suggest that overconfidence is a function of assessing self with respect to success and failure one has attained.
4 Pages(1000 words)Essay
Free trade vs. Protectionism: The Great Corn-Laws Debate
From the eighteenth century, the industrial success of laissez-faire Britain proved the superiority of free-market and free-trade policies. Through such policies, which unleashed the entrepreneurial energy of the nation, Britain beat interventionist France, its main competitor at the time, and established itself as the supreme world economic power.
3 Pages(750 words)Essay
Debt Crisis in Developing Countries
Developing countries are faced with low standards of living, underdevelopment, and high poverty levels, weak and unstable currencies, low capital levels and low GDP. All the above problems faced by developing countries are caused by debts which affect not only those who acquire loans but also generations that follow.
12 Pages(3000 words)Essay
The politics of deficits, surpluses, borrowing and debt
osure systems influence financial development and hence economic growth, as shown by researches done on cross-country level [King and Levine 1993a,b; Levine and Zervos 1998; LaPorta, Lopez-de-Silanes, and Shleifer 2000], as well as by firm-level studies [Demirguc-Kunt and
8 Pages(2000 words)Essay
Free trade or protectionism
The argument between protectionism and free trade is at least three centuries old, almost as old as the concept of free trade. It gave birth to two opposing political ideologies - capitalism and socialism. While
40 Pages(10000 words)Essay
Globalization and the gains from international trade
In a progressively more global world, a number of gains are there to write home. The various inter-governmental organizations are not as much effectual, and international businesses and entities continue to define stipulations. Governments’ role
7 Pages(1750 words)Essay
In the last decade voting turnout and political participation in the UK has declined. What are the possible reasons for this What could be done to help solve the problem
It is one of the major concerning points for the people who like researching about the role of common people in the nation’s politics. The paper is to
2 Pages(500 words)Essay
Colbert et al. identify contribution to literature as the reason for importance of their study but they are not precise. Potter also identifies a general statement of importance of his study in informing future studies. The inferred research
3 Pages(750 words)Essay
Let us find you another Essay on topic Protectionism, Gains from Trade, and Trade Balance Deficits and Surpluses for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us