Macroeconomics: Free Trade, WTO, Protectionism, Trade War, Balance of Payment, Absolute Advantage, Comparative Advantage

MACROECONOMICS

TABLE OF CONTENTS
Question 1........................................................................................................................................3
1...................................................................................................................................................3
2...................................................................................................................................................3
3...................................................................................................................................................4
4...................................................................................................................................................4
5...................................................................................................................................................4
6...................................................................................................................................................5
7...................................................................................................................................................5
Question 2........................................................................................................................................5
1...................................................................................................................................................5
2...................................................................................................................................................6
3...................................................................................................................................................6
4...................................................................................................................................................6
Question 3........................................................................................................................................6
1...................................................................................................................................................6
2...................................................................................................................................................7
3...................................................................................................................................................7
Question 4........................................................................................................................................7
(i).................................................................................................................................................7
(ii)................................................................................................................................................8
Question 5........................................................................................................................................8
1...................................................................................................................................................8
2...................................................................................................................................................8
3...................................................................................................................................................9
4...................................................................................................................................................9
REFERENCES..............................................................................................................................10

Question 1
1.
Argument for free trade:
 Free trade will lead to increase in the optimum utilization of resources because of
international division of labour.
 It will also help in increasing the global output because countries can acquire goods at
cheaper prices.
 The domestic produces do not want to lose their existence, thus free trade will keep the
spirit of competition in economy.
 The free trade is also one of the best way to safeguard the countries against the
discrimination and generate international cooperation.
 It is also best for protecting the country for specialization which further leads to the
corruption.
Argument against free trade:
 The free trade is not beneficial for low developed countries because it brought colonial
imperialism.
 The argument against free trade is that it may ruin the domestic industries and producers
if they unable to compete properly.
 Under these principles, all round development of industries are not possible because all
countries are not specialized in all commodity production.
 Penetration of harmful foreign goods and danger of over-dependence on foreign goods is
also an argument against the free trade (Nakamura and Steinsson, 2018).
2.
The role of World Trade Organization (WTO) is as follows:
 Orchestra conductor: They formed the rules and regulations of international trade and
look out whether countries are applying this rule while trading or not.
 Tribunal: They also responsible for settling the disputes between its member parties or
countries.