Country a and Country B Entered into a Free Trade

question 94

Multiple Choice

Country A and Country B entered into a free trade agreement recently. After this, Country A starts importing heavy machinery from CountryB. Country A used to previously import such machinery at lower rates from another country. Which of the following has occurred in this scenario?

• A) Trade creation
• B) Efficiency gain
• C) Trade deficit
• D) Trade diversion

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Definitions:

Direct-Financing Lease

A lease agreement where the lessor effectively finances the asset for the lessee, recognizing interest revenue over the lease term.

Credit-Approved Customers

Individuals or entities that have been evaluated and deemed creditworthy by a lender, allowing them to receive goods or services in advance of payment.

Present Value Interest Factors

Present value interest factors are used to calculate the present value of a future amount of money or stream of cash flows given a specific interest rate.

Lease Liability

A financial obligation representing the present value of future lease payments owed by a lessee under a lease agreement.