When free trade areas are established, the trade volume among member nations increases more rapidly compared to their trade with non-member countries. What term do economists use to describe this phenomenon?

Multiple choice question for The International Economy And Globalization. Select an option, then review the explanation below.

Explanation

The correct term is trade diversion, which refers to the shift in trade patterns where member countries increase trade among themselves at the expense of trade with external nations.

Practice related questions from the same subject.

1.In which type of goods do Less Developed Countries (LDCs) typically hold a comparative advantage?
2.Why did output decline drastically in the economies undergoing transition?
3.When products are sold abroad at prices below the marginal cost of production and the marginal benefit to local consumers, which policy is most likely supporting this situation?
4.How do tariffs affect the production levels of domestic companies and the consumption habits of consumers?
5.The equilibrium exchange rate adjusts to neutralize disparities in which of the following international economic factors?

When free trade areas are established, the trade volume among member nations increases more rapidly compared to their trade with non-member countries. What term do economists use to describe this phenomenon?

Explanation

More The International Economy And Globalization MCQs