How can national security possibly be threatened when a nation engages in free trade and specializes on the basis of comparative advantage?
What will be an ideal response?
Free trade is based on comparative advantage and specialization. A country specializes in the production of a good in which it has a comparative advantage. Hence, when a nation engages in free trade, resources that are required for strengthening the defense of a country are likely to be guided toward the production of goods that have an export potential. Moreover, specialization may cause a nation to import military weaponry if it does not have a comparative advantage in its production. If a crisis develops with the country from which such weapons are being imported, it is unlikely that they may continue to export. This hampers the ability of a country to preserve its integrity in times of war and thus acts as a threat to national security.
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Since the 1930s, overall tariff rates in the United States have
A) increased. B) decreased. C) remained unchanged. D) become very unstable, changing week to week.
When the distribution of income is adjusted for noncash transfers, the income distribution shows:
A. Perfect equality B. Greater equality C. Greater inequality D. Little, if any, change