An Economic Theory About International Trade That Is Based on the Assumption

question 53

Multiple Choice

An economic theory about international trade that is based on the assumption that there are only two countries trading two goods

• A)is useless,since the real world has many countries trading many goods.
• B)can be useful only in situations involving two countries and two goods.
• C)can be useful in the classroom,but is useless in the real world.
• D)can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

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Definitions:

Foreign Subsidiary

A company that is owned or controlled by another company (the parent company) but is located in a different country.

Functional Currency

The currency of the primary economic environment in which an entity operates, usually the currency in which it primarily generates and spends cash.

Other Expenses

Costs that fall outside of a company's primary operating activities, such as administrative expenses or interest payments.

Exchange Rates

The frequency at which currencies from different countries can be exchanged, playing a role in international trading and investment schemes.