BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Exporting as much as possible and receiving gold.
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Reallocation of existing goods between the two countries.
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The fact that exchange brings both specialization & reallocation of greater output & the increased welfare in each country
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One country receiving both imports & exports
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Detailed explanation-1: -When we specialize and exchange we both benefit. Specialization and trade is called a positive sum game because we both are better off after exchange than we were before.
Detailed explanation-2: -When nations specialize, this exchange creates gains from trade. The benefits of specialization include a larger quantity of goods and services that can be produced, improved productivity, production beyond a nation’s production possibility curve, and finally, resources that can be used more efficiently.
Detailed explanation-3: -Gains from trade can be calculated by adding up consumer and producer surplus. Gains of trade will be at the maximum when a country produces the lowest opportunity cost product relative to other producers.
Detailed explanation-4: -the price of one good in terms of the other that two countries agree to trade at; beneficial terms of trade allows a country to import a good at a lower opportunity cost than the cost for them to produce the good domestically, thus the country gains from trade.