________ is said to exist when the formation of a regional trading group leads to an expansion of trade above pre-group levels.

Question

Quizplus · Accepted Answer

Trade creation refers to the situation where the formation of a regional trading group leads to an increase in trade above pre-group levels by allowing member countries to specialize in the production of goods and services in which they have a comparative advantage, leading to increased efficiency and lower prices. Trade diversion, on the other hand, refers to the situation where trade is diverted away from a more efficient supplier outside the regional trading group towards a less efficient one within the group. Trade exclusion and distortion are not relevant to the concept of regional trading groups leading to increased trade.

________ Is Said to Exist When the Formation of a Regional