Globalization and trade:
A) expands economic potential in a similar fashion to productivity enhancing technological progress.
B) shifts both the short-run and long-run aggregate supply curves to the right.
C) provide an opportunity to reduce inflation permanently.
D) all of the answers provided are correct.

Question

Quizplus · Accepted Answer

Globalization and trade can expand economic potential by increasing competition, specialization, and access to larger markets, which is similar to the effects of productivity-enhancing technological progress. This can shift both the short-run and long-run aggregate supply curves to the right, leading to lower prices and higher output levels. Additionally, by allowing countries to access a wider range of goods and services at lower prices, globalization can help reduce inflation in the long run. Thus, all the statements provided in the answer choices are correct.

Globalization and Trade