The Classic Theory of Comparative Advantage Suggests That Each Country

question 62

Multiple Choice

The classic theory of comparative advantage suggests that each country should ________.

• A) attempt to maintain a trade surplus by exporting more than what it imports
• B) attempt to maintain a trade deficit by importing more than what it exports
• C) produce all goods and services it requires for domestic consumption
• D) specialize in those areas where it can produce more efficiently than other countries
• E) produce a wide range of products to maintain an attractive international portfolio

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Definitions:

Direct Aid

Financial or material support provided directly to individuals, organizations, or countries in need, often aimed at alleviating poverty or addressing emergencies.

World Bank

An international financial institution that provides loans and grants to the governments of low and middle-income countries for the purpose of pursuing capital projects.

Economic Growth

An increase in the production of economic goods and services, compared from one period of time to another.

Developing Countries

Nations with lower levels of industrialization, lower standards of living, and lower Human Development Index ratings compared to developed countries.