Answer to Question #55460 in Economics of Enterprise for Sarah

Question

"Emerging economies, such as china, pose a threat to the comparative advantage of the U.S". How can such a statement be evaluated using the insights learned from the standard trade model? Provide full verbal and graphical explanation.

Answer 1

The impact from economic competitors like China on the U.S. position is enormous. But there’s no way to preserve America’s extremely high standard of living relative to the rest of the world. U.S. will not necessarily go down, but the rest of the world will improve more rapidly than U.S. The only way to preserve U.S. high standard of living is to get real smart – to find the value added in goods and services and go for it. The relatively uneducated person is at a severe disadvantage in this game.