The Phenomenon That Occurs When Low-Cost External Suppliers Are Replaced

question 37

Multiple Choice

The phenomenon that occurs when low-cost external suppliers are replaced by high-cost suppliers inside the free trade area is called:

• A)trade alteration.
• B)trade qualification.
• C)trade creation.
• D)trade diversion.

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Definitions:

Equilibrium GDP

The level of Gross Domestic Product where aggregate supply equals aggregate demand, indicating a stable economy with no tendency for change in the price level or output.

Multiplier

Any change in spending (C, I, or G) will set off a chain reaction leading to a multiplied change in GDP. Equation is 1/(1 - MPC).

Federal Budget Deficit

A situation where the government's expenditures exceed its revenues over a specific fiscal period.

Real Interest Rates

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to investors.