Question

The theory of overlapping demand:

A. explains how international trade in manufactured goods will be linked to gross national income.

B. states that a nation will trade goods that can be produced with the production factor that is most abundant.

C. explains why companies will add excess capacity to their production systems.

D. two of the above.

E. none of A, B, or C.

Answer 1

The theory of overlapping demand links international trade in manufactured goods to the GNI levels of countries, suggesting that countries with similar incomes are likely to trade more with each other due to similar demands.

Step-by-step explanation:

The theory of overlapping demand explains how international trade in manufactured goods will be linked to gross national income (GNI). The correct answer to the student's question is A. This theory suggests that countries with similar levels of GNI will have similar demands for goods and therefore are more likely to trade with each other. The idea behind this is that with similar economic structures and incomes, these countries will produce and consume similar goods, fostering trade between them.