GK
ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Are less productive than their large trading partners.
|
|
|
Are more productive than their large trading partners.
|
|
|
Realize terms of trade lying near the MRTs of their large trading partners.
|
|
|
Have demand preferences and income levels lower than their large trading partners.
|
Detailed explanation-1: -Free trade agreements (FTAs) (in general) increase trade, lower prices for con-sumers, and provide export opportunities for producers. As such, FTAs are usually described as beneficial to a country as a whole; however, gains from FTAs are not always shared equally within the country.
Detailed explanation-2: -Consumers in smaller countries would always gain from mutual trade liberalization because they would not only have access to cheaper goods and products of high quality, but also to more variety.
Detailed explanation-3: -Trade based on comparative advantage should tend to benefit small countries more than large countries. That is because the benefits of comparative advantage are proportional to the difference between the relative prices in world markets and the relative prices that would prevail in home markets without trade.
Detailed explanation-4: -Consumers benefit from lower prices. Free trade reduces the price of imported goods. This enables consumers to enjoy increased living standards. After the purchase of imports, they have more left over income to spend on other goods. Free trade can also lead to increased competition.