Why Is Trade an Important Source of Economic Progress

question 128

Multiple Choice

Why is trade an important source of economic progress?

• A) It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage.
• B) It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods.
• C) It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes.
• D) All of the above are correct.

---

Definitions:

Present Value

The immediate worth of a future cash stream or sum, taking into account a defined return rate.

Compound Interest

This refers to interest being calculated on both the original amount deposited or borrowed and on the interest that has previously been added over time.

Desired Rate

The expected or target rate of return on an investment or project, often used as a benchmark for evaluating potential investment opportunities.

Depreciation Deduction

A tax deduction representing the decrease in value of an asset over time, allowed to be deducted from taxable income.