Does Trade And Investment Play A Huge Role For An Economy 's Transformation?

2083 Words Nov 20th, 2016 9 Pages
Does trade and investment play a huge role for an economy’s transformation? Actually they are the main factors that drive economic growth. The coefficients estimated that for the period running 1970 through 1984 suggest that the growth of real GDP rises by about 0.2 percent points for every 1 percent point increase in the growth rate of the international trade (Van den berg & Lewer, 2006). Today 's economy is characterized by innovations and changes that are frequently discontinuous and usually far-reaching and it is also portrayed by enduring streams of new items and advances and by expanding variety (Ringbakk and Root, 1974).
Firstly, International trade is the trading of products and ventures crosswise over worldwide outskirts. It makes the economy to make utilization of the characteristic assets for the creation of merchandise and how it 's most appropriate. It has been discussed that international trade arises when a country specializes in the production of certain goods and thus it produces more than what is needed to supply the domestic demand and therefore it exports the surplus (Collings, 1929). Also, it empowers a nation to acquire products are not produced in the economy as it may be expensive by bringing in from different nations at lower costs. Another thing is that it increases efficiency due to the international competition, each producer tries to produce the better quality goods (Collings, 1929). On the other hand, international trade may have a negative…
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