Question

During the improving economic conditions of 2015 and early 2016 much additional construction of homes and condos throughout much of the U.S. took place. This provided a significant increase in the income of workers in the construction trades. Many of the construction workers were immigrants and have family and relatives in other countries. Often these workers would send part of their income to their less fortunate relatives in their old country, especially in Mexico and some of the South American countries.
Which of the economic principles best describes this situation?

b. Using the principle you have selected, describe the chain of events that best explains how increased spending for U.S. home and condo construction is likely to affect the performance of the economies of these South American countries.

Answer 1

Answer:

Which of the economic principles best describes this situation? - Free-trade (and free-movement of labor) can make everyone better off.

Most economists agree that free trade makes everyone better off because it allows each economic agent to specialize in what they do best (in what they have a comparative advantage over others).

In this case, the United States, an advanced nation, has many comparative advantages over its southern neighbor: Mexico, which is still a developing nation. Free trade allows the movement of a wide array of goods and services from Mexico to the United States, something that benefits everyone.

Free movement of labor also benefits people in the same way, even when it is only partially free. In the United States, there is a large mexican population who perform all kinds of jobs, for example, in the construction businesses. This benefits American companies because they obtain their much needed labor, and benefits Mexican immigrants because they get jobs that pay more than what they would earn in Mexico.

b. Using the principle you have selected, describe the chain of events that best explains how increased spending for U.S. home and condo construction is likely to affect the performance of the economies of these South American countries.

If investment in new housing increases in the United States, more labor is needed to build those houses, included labor provided by immigrants from Mexico and South American Countries.

These immigrant workers earn significantly more than what they would earn in their home countires, something that allows them to set aside part of their income to send to their relatives. The remittances improve the living conditions of the relatives, and now they can consume more, and save more. This event improves the economic condition of the home countries.