Question

According to Ricardo’s analysis, a country exports any good whose production requires fewer labor hours per unit that the labor hours per unit needed to produce the good in the foreign country. That is, the country exports any good in which its labor productivity is higher than the labor productivity for this good in the foreign country. Do you agree or disagree? Why?

AND

Mercantilism recommends that a country should limit its exports, so that more of the otherwise-exportable products are instead available for local consumption. Do you agree or disagree with mercantilism’s recommendation. Explain why

Answer 1

1) Agree.

Ricardo's anaysis explains how trade can be mutually beneficial . Based on this analysis a country can gain from trade even if it has absolute disadvantage in the Productivity of both commodities. The analysis can also used to explain why countries engage in international trade when one country's workers are more efficient at producing a good than workers in other countries. ( Requiring less labour hours to produce a commodity implies that the production is more efficient. )

2) Disagree

In today's world, no country can remain as a closed Economy. International trade can play a significant to to role in the growth of any nation. Export earnings are an important component of income for a nation . Without exports, there will be excess supply in the market.

Note : Mercantilism recommends maximisation of exports and limitation of imports . Statement given is incorrect.