Certified Supply Chain Professional (CSCP) Practice Exam

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Prepare for the Certified Supply Chain Professional Exam with a comprehensive quiz featuring multiple choice questions and essential study material. Gain the knowledge and confidence needed to excel in your certification journey!

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How does the gravity model of trade operate?

  1. By assessing cultural factors between countries

  2. By identifying countries with similar economies

  3. Based on the distance between countries and transport costs

  4. By analyzing the historical trade agreements

The correct answer is: Based on the distance between countries and transport costs

The gravity model of trade operates on the principle that trade flow between two countries is directly proportional to their economic sizes (often measured by GDP) and inversely proportional to the distance between them. This means that larger economies tend to trade more with each other, while greater distances usually reduce the volume of trade due to higher transportation costs and other trade barriers. Thus, the model quantifies trade potential based on these key factors, highlighting how physical distance and related transport costs can significantly influence trade relationships. In practical terms, this suggests that countries that are geographically closer to each other are more likely to engage in higher volumes of trade, all else being equal. The other choices involve considerations that are not foundational to the gravity model. For instance, while cultural factors and similarities in economies can influence trade, they are not the primary basis of the gravity model. Similarly, historical trade agreements matter in trade dynamics but do not form the core operational logic of how the gravity model functions.