The theory that suggests specialization by country can increase worldwide production is:
A) the theory of comparative advantage.
B) the theory of foreign direct investment.
C) the international Fisher effect.
D) the theory of working capital management.

Question

Quizplus · Accepted Answer

The theory of comparative advantage suggests that when countries specialize in producing goods or services that they are relatively more efficient at producing, it leads to increased production and trade among countries. This theory is based on the idea that countries should specialize in producing goods and services that they can produce at a lower opportunity cost than other countries. This leads to increased efficiency and higher output overall. Foreign direct investment, the international Fisher effect, and the theory of working capital management are not directly related to this concept.

The Theory That Suggests Specialization by Country Can Increase Worldwide