Which of the following is a feature of the 'Gravity Model' of international trade?
A. Trade is independent of distance
B. Bilateral trade flows are positively related to the economic sizes of the countries and negatively related to the distance between them
C. Trade is determined only by comparative advantage
D. Only tariffs determine trade volumes
Answer: Option B
Solution (By JKSSB Mock Tests)
The gravity model predicts that the volume of trade between two countries is proportional to the product of their GDPs and inversely related to the distance (and other trade costs) between them.
Explanation:
The Commission for Agricultural Costs and Prices (CACP) recommends Minimum Support Prices for various crops, which are then approved by the government.
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