Sunday, March 29, 2009

full employment of factors of production (2)

Of course ,the real world does not always reach full employment.the assumption of full employment is not made to ignore real-world problems,however ,but to separate conceptually the problem of efficiency and welfare from that of idle capacity.the internal problem of unemployment may not present itself any differently when the country is in autarky then in a trading situation ;policies that are not necessarily "international" in dimension can be used in either case.By moving to a higher indifference curve ,there are gains from trade even if the country has unemployment ;the opening of the country to trade will lead to different prices facing consumers and producers than was the case with autarky .gains from exchange and specialization still occur .

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