Which of the following is a feature of the 'Gravity Model' of international trade?
A. Trade is determined only by comparative advantage
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 independent of distance
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:
Potential output is the level of real GDP that can be sustained over the long term without generating inflationary or deflationary pressures, given existing resources and technology.
Explanation:
Human capital comprises the knowledge, skills, health and other attributes of individuals that affect their productivity and are accumulated through education, training and health expenditure.
No comments yet. Be the first to start the discussion!