Question

Which of the following statements best represents the effect of free trade on standards of living?

A) Free trade generally leads to higher standards of living due to increased economic growth and access to a wider range of goods and services.
B) Free trade tends to decrease standards of living as it results in job losses and increased income inequality.
C) Free trade has no significant impact on standards of living as it primarily benefits large corporations.
D) Free trade is detrimental to standards of living in developed countries but beneficial in developing nations.

Answer 1

Free trade generally leads to higher standards of living due to increased economic growth and access to a wider range of goods and services.

Step-by-step explanation:

The statement that best represents the effect of free trade on standards of living is A) Free trade generally leads to higher standards of living due to increased economic growth and access to a wider range of goods and services.

Free trade promotes economic growth by allowing countries to specialize in the production of goods and services they can produce most efficiently, known as comparative advantage. This leads to increased productivity and higher incomes, which in turn raise the standards of living for individuals in the trading nations.

For example, when country A specializes in producing agricultural products and country B specializes in manufacturing automobiles, they can trade these goods with each other. This allows country A to have access to affordable automobiles and country B to have access to affordable agricultural products, improving the standards of living for people in both countries.