The gravity model explains why
A) trade between Sweden and Germany exceeds that between Sweden and Spain.
B) countries with oil reserves tend to export oil.
C) capital rich countries export capital intensive products.
D) intra-industry trade is relatively more important than other forms of trade between neighboring countries.
E) European countries rely most often on natural resources.

Question

Quizplus · Accepted Answer

The gravity model predicts that trade flows between two countries are directly proportional to their economic sizes (measured by GDP) and inversely proportional to the geographic distance between them. In this case, Germany's larger economy and closer proximity to Sweden result in higher trade volumes compared to Spain.

The Gravity Model Explains Why