..ooo AT&T; 3:17 AM 3996 Question 2 Which is a significant explanation for the g

Question

..ooo AT&T; 3:17 AM 3996 Question 2 Which is a significant explanation for the general success of the gravity model? Multiple Choice Large economies have relatively larger areas, which raises the probability that a productive activity will take place within the borders of that country. Large economies tend to avoid trading with small economies. Large economies tend to have large incomes and tend to spend more on imports. Large economies have relatively large incomes, and hence spend more on government promotion of trade and investment.

Explanation / Answer

The right answer is option C.

Explanation: Large economies do not necessarily have a large geographic area. So, option A is not valid. Large economies do not always avoid trading with small economies. So, option B is also invalid. Large economies have a higher income because of which they have a high level of purchasing power which allows them to import more. So, option C is valid. The government of large economies does not necessarily promote trade rather they often restrict trade through high barriers. So, Option D is invalid.

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