Which of the following helped trade flourish since World War II?

Question

BlackTom AI · Accepted Answer

The question asks which development helped trade flourish after World War II.
Option 1: Reduction of tariffs. This move is central to postwar trade liberalization. Lower tariffs reduced the cost of imported goods and opened markets, were integral to the GATT era and later WTO framework, and they facilitated greater cross-border exchange and specialization. This is the primary driver most economists cite for the expansion of global trade in the decades following 1945.
Option 2: Increase of tariffs. Raising tariffs generally protects domestic industries but raises the cost of imported goods and provokes retaliation, leading to trade wars and reduced global trade flows. Such a policy counters the trend of expanding trade that characterized the postwar era, making this option contrary to observed outcomes.
Option 3: Adoption of import substitution policies. Import substitution aims to replace imports with domestic production, often through tariffs and quotas, which can limit foreign competition but typically reduces international trade volume and efficiency gains from global specialization. This approach is more associated with developing-country strategies in earlier decades and does not explain the general postwar surge in trade.
Option 4: Global restriction in capital flows. Imposing widespread restrictions on capital movements tends to dampen international investment and financial integration, inhibiting the globalization of production and trade finance. In the postwar period, there was a trend toward liberalization of capital flows in many regions, not broad restriction, so this option does not explain the flourishing trade.
Collectively, the emphasis on reducing barriers to trade best accounts for the observed expansion in global trade after World War II, while the other options describe policies that typically constrain or slow trade growth.

BU.232.725.81.SP25 M1 Comprehension Check (82)

Which of the following helped trade flourish since World War II?

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