Trade is the buying and selling of goods, services, or assets between people or companies. It can be as small as an exchange of pen for pencil or involve multi-million contracts. Trade is central to a healthy economy and helps a country grow.
Trade happens because people need and want things that they do not have or cannot produce themselves. So, for example, if Liam has food and Henry has wool, they will trade, or swap, their goods, satisfying both their needs. This is called the barter system and was common before the development of money.
In the modern world, trade is more than just domestic; it can involve countries, or even the whole planet. This is called international trade. Countries trade because they have resources, such as oil or skills, that others want and need. They also trade to gain access to other markets, which allows them to grow faster.
However, there are costs to trading and not everyone benefits from it. When a country opens up to trade, it changes the demand and supply of its products and services, which has knock-on effects on prices in other sectors. This can have a negative impact on workers from industries that lose out, or consumers who now pay higher prices. This is why it is important to promote public policies, such as unemployment benefits and safety-net programmes, that help redistribute the gains from trade. In the long run, reducing barriers to trade is a key driver of economic growth.
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