ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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people growing rice and then eating it
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people making sandwiches and refusing to give them away at lunch
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people having too much of one thing and needing something else
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None of the above
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Detailed explanation-1: -One is a net wealth effect that leads to an increase in the aggregate demand for goods and services. The other, terms of trade effect, are that an improving terms of trade means that the rate of return of producing the nontraded commodity rises.
Detailed explanation-2: -The five main reasons international trade takes place are differences in technology, differences in resource endowments, differences in demand, the presence of economies of scale, and the presence of government policies. Each model of trade generally includes just one motivation for trade.
Detailed explanation-3: -Trade is critical to America’s prosperity-fueling economic growth, supporting good jobs at home, raising living standards and helping Americans provide for their families with affordable goods and services.
Detailed explanation-4: -But free trade can – and has – produced many negative effects, in particular deplorable working conditions, job loss, economic damage to some countries, and environmental damage globally.