Question

How does international trade theory help to explain the existence and benefits of regional trade agreements?

How might the use of a single currency within a regional trade area help with the economic growth of that area?

Answer 1

International trade is then the concept of this exchange between people or entities in two different countries. People or entities trade because they believe that they benefit from the exchange.

Regional trade agreement help to boost countries relationship with each other as well as cultural cooperation between countries.

Regionals trade agreements are like ; Rcep ,Nafta, free trade agreements and preferential trade agreements.

If the same currency is used by countries, then economic stability will remain in that region. Because the fluctuation due to the use of a currency is likely less.

Reducing dependence on the dollar due to the use of a single currency will help countries to export imports and reduce their dependence on the dollar, thereby avoiding financial crises like 2008.

We can provide such facility through the currency swap agreement. Just like India has signed a currency swap agreement with SAARC Countries. Under which an end will be created which will be used to ensure the availability of import export by all the countries and less need of imf currency in any currency crunch conditions.

Cultural corporations will also be seen in a particular area because the use of the same currency will make their culture dependent or interconnected.