ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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produce beyond its production possibility frontier.
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increase its production of goods for domestic consumption.
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reduce its own production levels and buy cheaper imports.
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expand its consumption possibilities.
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Detailed explanation-1: -Free trade agreements FTAs can improve market access across all areas of trade – goods, services and investment – and help to maintain and stimulate the competitiveness of Australian firms. This benefits Australian consumers through access to an increased range of better-value goods and services.
Detailed explanation-2: -International trade allows and supports the national specialization of industries, bringing production costs and consumer prices downwards. Therefore, specialization and international trade couple up to increase consumption possibilities.
Detailed explanation-3: -Trade between two agents or countries allows the countries to enjoy a higher total output and level of consumption than what would have been possible domestically.
Detailed explanation-4: -Australia has an absolute advantage in Cotton because one acre of land in Australia can produce 6 bales of cotton whereas an acre in New Zealand can produce only 2 bales of cotton. Since each country has an absolute advantage, we say it is mutual.