The shifting of resources from inefficient to efficient companies as trade barriers fall produces static effects.

Question

Quizplus · Accepted Answer

As trade barriers fall, resources shift from less efficient companies to more efficient ones, resulting in static effects. This is because the economy is operating with the same amount of resources, but those resources are being allocated more efficiently. Static effects do not take into account changes in total output or economic growth over time.

The Shifting of Resources from Inefficient to Efficient Companies as Trade