Trade Barriers Reduce International Trade

Steps:

• Identify factors that increase or decrease trade volume: Trade expands with free flows of capital, investment, and aid; it contracts with restrictions like tariffs or quotas.
• Evaluate each option: Check if it promotes cross-border exchange of goods/services or imposes limits.
• Focus on protectionist measures: Quotas directly limit imports, shrinking trade quantities.
• Confirm impact: Global trade volume measures total imports/exports; barriers reduce this aggregate.

Why C is correct:

• Quotas are import restrictions that limit the quantity of foreign goods entering a market, directly reducing the volume of international trade per trade theory.

Why the others are wrong:

• A: Bank loans facilitate financial flows but do not involve goods/services exchange, so they do not affect trade volume.
• B: Foreign direct investment like building factories boosts production and exports, increasing trade.
• D: Government aid is a unilateral transfer, not a commercial exchange, leaving trade volume unchanged.

Final answer: C