It Is Argued That Import Substitution Is a Misguided Trade

question 28

Essay

It is argued that import substitution is a misguided trade policy if the intent is to promote long-term economic growth. Explain the reasons underlying this argument.

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Definitions:

Resource Markets

Marketplaces where resources (like labor, capital, and raw materials) used to produce goods and services are bought and sold.

Invisible Hand

A metaphor coined by Adam Smith to describe the self-regulating nature of the marketplace where individuals' pursuit of self-interest benefits society.

Economic Efficiency

A state where resources are allocated in a way that maximizes the production of goods and services at the lowest cost.

Competitive Market Economy

An economic system where numerous buyers and sellers interact in the marketplace, with competition determining the price and quantity of goods and services.