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Chapter 21: Q 4. (page 521)

Explain how trade barriers raise wages in protected industries by reducing average wages economy-wide.

Short Answer

Expert verified

Because of trade barriers, there are various effects on industries and the economy.

Step by step solution

01

Step 1. Definition

Trade barriers are defined as the protectionist form of trade that is put by the governments to have a limited trade between various nations and economies.

02

Step 2. Explanation

A trade that happens on the basis of comparative advantage increases the average rate of wages in the economy and also decreases the income of import industries. And if a country is not trading on a comparative advantage basis the opposite will happen as the average wages decrease in the economy, while the workers in the protected industries would have an advantage.

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