Assume both labor and capital are completely mobile,and a nation is capital rich/labor scarce.In order to increase welfare,what kind of trade policy should the government adapt?
A) Restrict all trade,because the standard of living will decline and people will be worse off
B) Only restrict trade that will make the real wage fall,and allow trade that will not affect wages
C) Not restrict trade,because the real wage will eventually cycle back to the pre-trade value,eliminating any losses in the standard of living
D) Not restrict trade,because any decline in real wages will be matched with an even larger gain by those who own capital
Correct Answer:
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