Question

Consider the following statement from ‘The Conversation’1 regarding trade:
“The Federal Government’s new Buy Australian campaign comes amid growing concern that further layoffs will follow the loss of 1000 BlueScope jobs...”.

1. Use your knowledge to explain why buying foreign goods would lead to workers losing their jobs.
2. Would you encourage the government to continue funding the ‘Buy Australia campaign’? Explain your reasoning.

Answer 1

When people buy more of foreign goods, then their demand for domestic goods falls.

As a result of this, aggregate demand curve in the domestic economy shifts to the left, leading to a fall in both price level as well as GDP output

This increases unemployment in the home country, which makes the economy worse off

As a result, when people buy more of foreign goods, there is an increase in workers loosing their jobs in domestic country.

Yes, i would encourage government to continue funding for 'Buy Australia campaign' as it would mean people would buy more of domestic made goods, thereby increasing demand for domestic goods and services, leading to an increase in AD and GDP and thus reduce unemployment.