Questions
FA25 ECON 302 002 Homework #11 (International Trade)
Multiple choice
Which of the following are reasons to trade with the rest of the world? Select all that apply.
Options
A.Risk sharing to mitigate the effects of macroeconomic shocks.
B.Consumption smoothing over time.
C.Protection of jobs in low-wage industries or sectors.
D.International specialization in the production of goods and services.
E.Exploit differences in absolute advantage across countries.
F.Exploit differences in comparative advantage across countries.
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Step-by-Step Analysis
When evaluating why countries trade, several foundational ideas from international economics come into play, and each option should be weighed against these concepts.
Option 1: 'Risk sharing to mitigate the effects of macroeconomic shocks.' This is a valid reason for trade. By engaging with a broader set of trading partners and diverse markets, countries can diversify and reduce exposure to country-specific shocks, spreading risk across borders.
Option 2: 'Consumption smoothing over time......Login to view full explanationLog in for full answers
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