Discuss what the U.S. economy might be like if there were absolutely no restrictions on transactions between countries. Explain your rationale in your response.

Generally, Free trade leads to the most efficient use of world resources and would maximize world welfare. However, industrial countries invariably impose tariffs or other trade restrictions to protect some industry. If there is no trade restrcitions between countries, it would lead to import of many cheap and labour intensive products and services into US economy which could be counter productive for its domestic industries. With the current trade balance issue in US, this would further aggravate the balance of payment issue and may further create trade deficit for US. This is because of the comparative advantage. If I am good at doing something, obviously, I can produce that at lower cost and give better productivity. This will also make sure that I am able to use the labour, capital in the most efficient ways and so it leads to every country maximizing their productivity with minimum cost. This will lead to lower product prices and maximum value to the end customer. Trade lends itself to lower per unit cost, increased productivity, more efficiency, and increased economic growth for both countries. If I can’t produce this good myself, why not purchase it for a fraction of the amount I would have spent producing it myself, and use the resources and capital I would have spend doing something I am better at.

 

•Describe the different types of economic indicators to determine which single indicator provides the most useful information to the greatest number of stakeholders. Explain your rationale in your response.

 

Leading economic indicators predict a change in economy. A lagging indicator is one that follows changes in economy. Unemployment is one of the most popular lagging indicators. If the unemployment rate is rising, it indicates that the economy has been doing poorly. Coincident economic indicators occur at the same time as the conditions they signify. Personal income is a coincidental indicator for the economy. According to me, Coincident economic indicator e.g. personal income provides the most useful information to greatest number of stakeholders e.g. industries, public at large, US Government etc.

 

Discuss what the U.S. economy might be like if there were absolutely no restrictions on transactions between countries Answer