Comparative advantage theory holds that gains from trade are the result of capital movements from countries with low interest rates to countries with higher interest rates.

Question

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Comparative advantage theory states that gains from trade are the result of countries specializing in producing goods that they have a lower opportunity cost for, and trading with other countries for goods that they have a higher opportunity cost for. It does not necessarily involve capital movements or interest rates.

Comparative Advantage Theory Holds That Gains from Trade Are the Result