Why does interdependence bring economic growth?

Question

Responses

Interdependence increases international competition, which leads to lower prices.
Interdependence increases international competition, which leads to lower prices.

Interdependence creates greater protection for domestic producers, which enables them to raise prices.
Interdependence creates greater protection for domestic producers, which enables them to raise prices.

Interdependence strengthens governments, allowing great tax revenues.
Interdependence strengthens governments, allowing great tax revenues.

Interdependence enables specialized production, which is more efficient.

Answer 1

Interdependence brings economic growth primarily because it enables specialized production, which is more efficient. When countries or regions engage in trade and form economic ties, they can focus on producing goods and services in which they have a comparative advantage. This specialization allows resources to be used more effectively, leading to increased productivity and efficiency.

As nations trade freely, they benefit from a diverse range of products and services, which can lead to innovation and better resource allocation. Additionally, interdependence can stimulate investment and technological exchange, further contributing to economic growth.

While international competition can lead to lower prices, it primarily benefits consumers rather than directly driving growth. In contrast, the specialization enabled by interdependence creates a more dynamic and productive economy overall.