Question

Specialization and trade should lead to individuals learning specific skills and earning a salary.

True or False

Specialization and trade should lead to individuals learning specific skills and a higher living standard.

True or False

Answer 1

(1) True

As per law of comparative advantage, when countries specialize in producing and exporting the goods in which they have comparative advantage, trade will be mutually beneficial and all the trading countries will gain in terms of higher quantity of the goods consumed compared to pre-trade consumption. Therefore employment will increase if workers learn specific skills.

(2) False

However, higher trade and higher income does not necessarily mean standard of living will increase.