Question

The Republic of Argonia, owing to its vast resources of arable land and fresh water, is an agrarian nation It exports agricultural products and in turn imports products that it does not produce such as oil, machinery, computers, and electronic devices. The result is that it spends more on imports than it gains from exports. Which of the following theories prohibits such international trade?

A. New trade theory
B. Product life-cycle theory
C. Mercantilism
D. Heckscher-Ohlin theory
E. Theory of national competitive advantage

Answer 1

The correct option is C, mercantilism

Step-by-step explanation:

The theory of mercantilism is of the opinion that a nation should strengthen its economic power as well as generate abundant wealth by reducing imports whereas exports is tremendously increased with aim of achieving trade surplus rather than a trade deficit.

In order to achieve this feat a nation needs to embark on industrialization that makes it possible to convert its primary products into semi- or finished products that command higher value than exporting them in their raw state.

Answer 2

Answer: C. Mercantilism

Explanation: Mercantilism is a national economic policy made to promote and increase exports and reduce import in a country. It involves national policy with the objective of accumulating reserves (monetary) achieved through positive balance of trade. Mercantilism reduces current account surplus or reduce a possible current account deficit. In the past such policy had led to war and encouraged colonial expansion.

Europe was the epic center of mercantilism from the 16th to the 18th century before it fall, but some people still believed mercantilism is still practice in industrialize nations.