Before the trade agreement: After the trade agreement The Size of Economies A, 8

Question

Before the trade agreement: After the trade agreement The Size of Economies A, 8, and C and the Value of their Trade with D The Size of Economies A B, and C and the Value of ther Trade with D %Of Group ABC's GDP %ofGroup ABC's GOP One use to which a gravity model can be put is as an assessment tool of the effectiveness of a trade agreement The figures above summarize data for a group of hypothetical countries According to the figure on the left, trade prior to any agreement among the countries is Suppose that countries D and B reach a trade pact that substantially lowers trade impediments between them Acoording to the figure on the right, the agreemen OA, effective. with predictions from the gravity model consisiet O B. helpful to A and C D. No clear assessment is possible. nconsistent O C. inefective Click to select your answer

Explanation / Answer

Answer:

According to the gravity model, the trade between the two countries depends upon its distance and the economic size.

In the above question:

The trade prior to any agreement is consistent with the predictions of the gravity model.

The answer for the second part is: D (No clear assessment is possible)

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