Derland is a modern economy with a highly educated labor force and an average wage of $50,000 per year. Samland is a poor country where the labor force has an average education level of five years of schooling and an average wage of $600 per year. Which trade policy would be likely to have the most long-run impact in raising wages in Samland?

Question

Quizplus · Accepted Answer

Free trade would likely have the most long-run impact in raising wages in Samland. By allowing for the free flow of goods and services between Derland and Samland, Samland would have access to higher paying jobs and potentially increased foreign investment. Derland imposing import quotas or tariffs on foreign-produced products would limit trade and potentially reduce job opportunities in Samland. Samland creating new regulations to increase environmental protection may have positive impacts on the environment, but may not directly impact wages.

Derland Is a Modern Economy with a Highly Educated Labor