Question

Formation of regional economic groupings does not lead to trade diversion

Answer 1

Answer:

yes the statement is right it helps in growing economy and decrease diversion

Step-by-step explanation:

In 1st step lets have a look what is regional economic grouping .

Regional economic grouping is a sort of agreement between different economies regarding the trade and taxation , imports and exports duties. once you have done the agreement regarding certain things now you will benefit both economies with that .

With regional economic grouping both or different economies reach to an agreement and select the suppliers for their particular demand with economical pricing and delivering particular goods. So more consistent quality  and almost same suppliers work for same customer.

while if there is no formation of regional economic grouping then there are chances of diversion . for example a supplier is not in the agreement  will be kicked out due to many reasons like pricing , taxation, technology or regional conflicts.

so if there are regional economic grouping exist then it reduce the diversion.