Over the past few decades, East Asian economies have increased their share of wo
ID: 1180817 • Letter: O
Question
Over the past few decades, East Asian economies have increased their share of world GDP. Similarly, intra-East Asian trade-that is, trade among East Asians nations-has grown as a share of world trade. More than that, East Asian countries do an increasing share of their trade with each other. Explain why, using the gravity model.
Over the past few decades, East Asian economies have increased their share of world GDP. Similarly, intra-East Asian trade-that is, trade among East Asians nations-has grown as a share of world trade. More than that, East Asian countries do an increasing share of their trade with each other. Explain why, using the gravity model.Explanation / Answer
As the share of world GDP which belongs to East Asian economies grows, then in every trade relationship which involves an East Asian economy, the size of the East Asian economy has grown. This makes the trade relationships with East Asian countries larger over time. The logic is similar for why the countries trade more with one another. Previously, they were quite small economies meaning that their markets were too small to import a substantial amount. As they became more wealthy and the consumption demands of their populace rose, they were each able to import more. Thus, while they previously had focused their exports to other rich nations, over time, they became part of the rich nation club and thus were targets for one another
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