The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?" The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial. Import restrictions are the result of trade wars between hostile countries. Trade can have substantial effects on a country's distribution of income. Imports are only restricted when foreign-made goods do not meet domestic standards of quality. Restrictions on imports are intended to benefit domestic consumers.

Question

Nina Gordon

Business

31 August, 16:37

The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?" The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial. Import restrictions are the result of trade wars between hostile countries. Trade can have substantial effects on a country's distribution of income. Imports are only restricted when foreign-made goods do not meet domestic standards of quality. Restrictions on imports are intended to benefit domestic consumers.

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Kody Collins · Answer 1

Trade can have substantial effects on a country's distribution of income

Explanation:

The Ricardian model is considered the basic and simplest international trade equilibrium model that is learned. When trades occur between countries, the Ricardian model is used to explain everything about the trade.

The Ricardian model has some assumptions. They are; (1) trade involves only two countries, (2) they produce two goods, (3) only one input is required in production, (4) in each country, the opportunity cost is constant on goods, (5) transaction or transportation cost are non-existent.

The Ricardian model benefits the two countries involved, however, to effectively utilize the distribution of income within the country, restrictions on the imports of some goods must be put in place. Therefore, trade can affect the country's distribution of income.