The shifting of trade from countries outside a regional trade bloc to nations within a bloc is known as a. a voluntary import expansion. b. a trade agreement. c. trade deflection. d. trade diversion.

D. trade diversion.

Explanation:

Trade diversion -

In this case , the trade is diverted from a more efficient exported to the less efficient exporter, via a customs union or free trade agreement .

The cost of the good reduces , due to lower tariff , in comparison to the trade with the country outside the agreement with lower cost goods but higher tariff .

The trade is created when the formation of the trade agreement between the countries reduces the good's price for more consumers and hence the overall trade increases .

answer/// real gdp decreases to y3 and the price level falls to p3;