What term describes what happens when all parties agree to exchange their money for goods or services and both sides expect to gain from the exchange?
A) voluntary trade
B) demand
C) supply
D) involuntary trade
Answers
Option C Supply is the answer
Answer:
c
The words “exchange” and “trade” refer to the same activity–people who have one thing and want a different thing can exchange or trade it voluntarily with each other. The word “exchange” tends to emphasize trades within a single country or locale. The word “trade” tends to emphasize international aspects. Regardless, the activity of exchanging or trading is the same, whether it is with your neighbor or someone living clear across the world.
Economists disagree about some things, but they universally agree that free trade–meaning the opportunity to engage in voluntary exchange or trade–is beneficial on all sides. To summarize this mutual benefit, economists often say “There are gains from trade.” In the case of individuals, exchange obviously won’t take place unless both parties benefit. See Comparative Advantage and the Benefits of Trade for a discussion of how free exchange benefits the participants. In the case of whole countries, no matter how large and complex the world or no matter how interconnected the worldwide economies–which is sometimes called “globalization” or “interdependence”–the underlying individuals who engage in trade all benefit. Despite the evident benefits, government restrictions on free trade are common. The arguments for and against restricting trade and exchange are discussed at Barriers to Trade.
“Buying local” has become a hot topic. Buying local evokes local or national pride. Buying from local producers saves on transactions costs, such as the costs of transportation. However, it can also result in the tradeoffs of paying higher prices or limiting the opportunities available to local citizens. You can learn more about the arguments for and against buying local at Globalization, Interdependence, and Local Trade.
This page focuses on the basic meanings of exchange and trade.