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What does this mean? Since businesses have to pay more for their workers, they're going to concentrate more on investing in new factories and new materials (capital).
(2) The theory of comparative advantage, which is the fundamental idea behind the economics of international trade. It says that if each nation produces the goods that they can make most efficiently (in other words, they have the required natural resources, the right level of technology, enough skilled laborers, etc. to produce those goods), all nations will benefit in the end, by trading for the goods produced by other nations. In other words, a nation shouldn't try to produce everything it needs; it should do what it does best, and count on others to do what they do best...
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