The effect of trade on income distribution
A) implies that there are no real gains from trade.
B) is insignificant in the short run.
C) can be significant in the short run.
D) refutes the model of comparative advantage.
E) is positive for all segments of an economy.

Question

Quizplus · Accepted Answer

Trade can have a significant impact on income distribution, especially in the short run. This is because some workers and industries may experience job losses or reduced wages due to increased competition from foreign markets, while others may benefit from increased demand for their goods and services. In the long run, however, the overall gains from trade tend to outweigh these distributional effects.

The Effect of Trade on Income Distribution