1. Globalization and global trade have led to increased competition in world markets and increased allocation of scarce resources. Is it accurate to say that this is contributing to increased consumer...

Ans1:
Globalization has helped to increase the supply side potential of the economy which has led to
eduction in inflationary pressure. It would be somehow accurate to say that Global trade have led to
increased competition in world markets and thus contributed to increased consumer surplus and
eduction in Inflationary pressure.
Global trade allows consumer as well as producer or the economic agents to benefit from the voluntary
trading by specializing in producing a particular good. In economics terms, we refer to it the theory of
Comparative Advantage which means the ability of a person or a country to produce a particular good
or service at a lower marginal & opportunity cost over another. Even if one country is more efficient in
the production of all goods (absolute advantage in all goods) than the other, both countries still gain by
trading with each other as long as they have different relative efficiencies. In technical terms, Gains from
trade refers to increase in consumer surplus plus producer surplus from lower tariffs or otherwise
liberalizing trade .We can describe it as resulting from specialization in production from division of labor,
economies of scale, economies of scope etc. In addition to trade that is driven by comparative
advantage, there is Intra industry trade i.e. the two way trade between
oadly similar producers. This
trade often seems rather wasteful. But one reason is that it increases the intensity of competition in
market .In the absence of such trade, local supplier would have high degree of monopoly power over
their local market and trade or sometimes the mere threat of potential trade reduces this power. This
ings benefit to consumer. It can also lead to increase in producer efficiency as firms take into account
internal inefficiencies & as less efficient firms are taken over or driven out of business those remaining
are able to expand & exploit economies of scale in production.
Since Globalization & Global trade has helped to increase the supply side potential of the economy
which has led to the reduction in Inflationary pressure. This is so because when there were ba
iers to
trade demand in the domestic economy was met by domestic production only and in case of shortage it
leads to increase in Inflationary pressure so with Globalization and Global trade this problem was
overcome. Countries can now freely import & export goods i.e. it can import goods which are scarce and
can export goods which are abundant so this has led to increase allocation of scarce resources and has
helped to increase the supply side potential of the economy which has led to the reduction in
Inflationary pressure. It also has a potential impact of reduction in inflationary pressure due to increased
degree of competition associated with globalization as well as the possibility of opportunistic disinflation
in the face of favorable movement in International Prices.
The slowdown in Inflation was part of the fruits of globalization. If one takes into account liberalization
& deregulation of market competition has led to faster growth in production ,Increased labor supply,
esulting check on wage pressure, sound fiscal policies & the improved governance of monetary
authorities so it depicts that these were the factors which has led to reduction in Inflationary pressure.
Thus global trade promotes economic growth.
Ans1:
The trade between two nations occurs when one country has relative advantage in one good and other
country has relative advantage in some other good. So instead of focusing on the production of all
goods, each country focuses on the production of that in which it has relative advantage and for its
other requirements, it trade with the other nation. This relative advantage is measured in the monetary
units, in fact it is...