Self-study
Economist: Owing to global economic forces since 1945, our country's economy is increasingly a service economy, in which manufacturing employs an ever smaller fraction of the workforce. ██████ ██ ████ ███████ ██ ████ ███ ████ █████████████ ██████
"Surprising" Phenomenon
Why does shifting to a service-based economy with fewer manufacturing jobs lead the economist's country to engage in less international trade?
Objective
The correct answer will be a hypothesis that explains a key difference between service and manufacturing economies. This difference must either explain why service-based economies are less engaged in international trade or why manufacturing-based economies are more engaged in international trade.
7.
Which one of the following, ██ █████ █████ ████ ████ ██ ███████ ███ ██████████ ██████████ ██ █████████████ █████ ██ ███ ███████████ ████████
a
International trade agreements ████ ███████ ███████ ████ █████ ██ ████████████ █████ ███ █████ ██ █████████
This gives us a similarity between trade in manufactured goods and trade in services rather than a difference. Trade agreements may cover both kinds of trade, but we still don’t know why an increasingly service-based economy leads to a decrease in international trade engagement.
b
Employment in the ███████ ██████ █████ ██ ███████ ██ ████ ███████████ ██████ ██ ████ ██████████ ██ ██████████████
(B) gives a similarity between service employment and manufacturing employment. It doesn’t connect either to international trade or provide an explanation for why increased service employment and decreased manufacturing employment lead to decreased international trade engagement.
c
Because services are ███████ █████████ ██ ███████ ███████ ███ ████████ ████ ██ ██ ██████
This provides a difference in the market for services as opposed to manufactured goods. Because services are delivered in person, markets for services are local. Thus, if an economy is increasingly service-based, it will engage in less international trade.
d
Many manufacturing jobs ████ ████ ████████ ████████ ██ ████████ ██ ███████ ███████████
This may explain why the country is becoming more service-based, but it doesn’t explain why a service-based economy is less engaged in international trade. We need an answer that links the shift from manufacturing to services with a drop in international trade.
e
Some services can ██ ████████ ████ ███████████ ████ █████████ ██ █████ █████████ ████ ████ █████████ ██ ███ ███████████ ████████
We need an answer that explains why more services in the economist's country lead to less international trade. (E) only says that some services are cheaper abroad but doesn’t connect this to the economist’s country's level of international trade.