International trade is based on the notion that:

 Options:

a. Different currencies are an obstacle to international trade b. Goods are more mobile internationally than are resources c. Resources are more mobile internationally that are goods d. A country’s exports should always exceeds its imports

The Correct Answer Is:

b. Goods are more mobile internationally than are resources

Correct Answer Explanation: b. Goods are more mobile internationally than are resources

International trade is fundamentally rooted in the principle that goods are more mobile internationally than resources.

This concept forms the basis of economic interactions between countries and underlines the comparative advantage theory, which suggests that nations should specialize in producing goods and services in which they have a lower opportunity cost.

This specialization encourages trade, as countries can exchange their specialized products with others, leading to mutual benefits and overall economic growth.

Goods, such as finished products and commodities, are more easily transportable across borders than the resources needed for their production. This mobility of goods is facilitated by advancements in transportation, communication, and logistics.

The globalized nature of modern trade allows for the efficient movement of goods, contributing to the interconnectivity of economies. On the contrary, the other provided options do not accurately capture the essence of international trade:

Why the Other Options are Incorrect?

a. Different currencies are not necessarily an obstacle to international trade:

International trade involves transactions between countries with different currencies, and while this introduces complexities, it does not constitute an insurmountable obstacle. In fact, the existence of different currencies creates a need for foreign exchange markets, which facilitate the conversion of one currency into another.

This allows businesses and nations to engage in cross-border trade by overcoming currency differences through exchange mechanisms. Therefore, rather than being an obstacle, different currencies are managed through financial systems that enable international trade to function.

c. Resources being more mobile internationally than goods contradicts the foundational principles of international trade:

The principle of comparative advantage, a cornerstone of international trade theory, emphasizes that countries should specialize in producing goods and services where they have a comparative advantage. This does not imply that resources, such as raw materials or factors of production, are more mobile.

In reality, resources often face barriers to mobility due to their bulk, weight, or geographic constraints. The movement of goods, on the other hand, is facilitated by advancements in transportation and logistics. It is the mobility of finished products that drives international trade, not the free movement of resources.

d. The notion that a country’s exports should always exceed its imports oversimplifies the complexities of trade balances:

While a trade surplus can be beneficial for a nation in certain situations, it is not a universal rule that a country’s exports should always exceed its imports. The balance of trade is a multifaceted concept influenced by various factors such as exchange rates, economic policies, and global demand.

A balanced trade relationship, where countries engage in both exports and imports, allows for a more nuanced and mutually beneficial global economic environment.

The emphasis should be on the overall health of a nation’s economy and its ability to participate in international trade for mutual gain rather than a simplistic focus on export exceeding import in all circumstances.

In essence, international trade is a complex system influenced by a myriad of factors, and the accurate understanding of its principles is crucial for formulating effective economic policies and fostering global cooperation.

The correct answer, that goods are more mobile internationally than resources, aligns with the realities of trade dynamics and the principles of comparative advantage that guide nations in optimizing their economic interactions on the global stage.

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