Answer to Question 1
Because of the obvious significance of international trade to businesses, consumers, and workers, scholars have attempted to develop theories to explain and predict the forces that motivate such trade. Governments use these theories when they design policies they hope will benefit their countries' industries and citizens. Managers use them to identify promising markets and profitable internationalizatio n strategies. Similarly, FDI theories help MNEs assess the advantages and disadvantages of foreign investment.
Answer to Question 2
A
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Flexible exchange rates are supposed to prevent long-term trade deficits.
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