Correct Response: A. Free trade agreements are intended to eliminate barriers to trade and investment among the participating countries. U.S. trade agreements with other countries have resulted in a decrease in the price of most consumer goods. This is because many low-skilled jobs once performed in the U.S. are now being done by trading partners with less developed economies. Foreign exchange rates are affected by multiple factors, including trade, and may vary for a variety of reasons (B). Trade agreements have significantly increased the gross domestic product (GDP) of less- developed trading partners (C). Trade agreements tend to maximize the comparative advantage of each of the trading partners. Most trade agreements are with less developed countries, and less developed countries have a comparative advantage in manufacturing due to low labor costs and fewer environmental regulations (D). Therefore these trade agreements actually decrease the comparative advantage of U.S. manufacturing.
