Factors affecting international trade balance
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Questions and Answers

What is the impact of low savings rate on disposable income and imports?

  • Decreases disposable income and reduces imports
  • Increases disposable income and reduces imports
  • Increases disposable income and increases imports (correct)
  • Decreases disposable income and increases imports

How does low productivity affect export competitiveness?

  • Increases unit labour costs and makes exports more competitive
  • Increases unit labour costs and makes exports less competitive (correct)
  • Reduces unit labour costs and makes exports more competitive
  • Reduces unit labour costs and makes exports less competitive

What is the impact of high inflation rates on export competitiveness?

  • No impact on export competitiveness
  • Decreases export competitiveness (correct)
  • Makes exports price competitive
  • Increases export competitiveness

How does protectionism affect a country's current account?

<p>Leads to retaliation and worsens the current account balance (B)</p> Signup and view all the answers

Why might a country with a lack of comparative advantage struggle in international trade?

<p>Lack of cheaper labor and deregulation (B)</p> Signup and view all the answers

How are long term current account deficits typically funded?

<p>By encouraging foreign direct investment (FDI) (D)</p> Signup and view all the answers

What type of policy aims to reduce business costs, encourage investment, and shift the LRAS/PPF out, thereby reducing inflation?

<p>Supply-side policies (A)</p> Signup and view all the answers

Which policy involves decreasing government spending, increasing taxes, and subsequently leading to lower disposable income and less demand for imports?

<p>Deflationary demand policies (B)</p> Signup and view all the answers

What is a potential negative consequence of protectionist policies like tariffs on imports?

<p>Increasing costs of imports (B)</p> Signup and view all the answers

Which factor may contribute to making UK products more attractive to foreigners by making them appear cheaper?

<p>Weakening of the exchange rate (B)</p> Signup and view all the answers

What is a potential downside associated with less competition for domestic industry due to protectionist policies?

<p>Reduced productive efficiency in the UK (D)</p> Signup and view all the answers

Which condition states that a devaluation of the currency might not lead to an immediate improvement in the trade balance and could be inflationary?

<p>Marshall-Lerner condition (A)</p> Signup and view all the answers

Which policy aims to increase the Long-Run Aggregate Supply (LRAS) in order to lower prices and make exports more competitive?

<p>Supply-side policy (C)</p> Signup and view all the answers

What is a potential disadvantage of supply-side policies in terms of boosting exports?

<p>Time lag for results to be seen (D)</p> Signup and view all the answers

How can some supply-side policies potentially violate international regulations such as WTO or EU rules?

<p>By offering government subsidies that contravene regulations (D)</p> Signup and view all the answers

Which of the following is a benefit of protectionist policies to solve a current account deficit?

<p>Protection of strategic industries like defense or agriculture (D)</p> Signup and view all the answers

What is a common disadvantage of tariffs as a protectionist measure to solve a current account deficit?

<p>Higher prices having a regressive effect (D)</p> Signup and view all the answers

How does protectionism affect vulnerable industries when used to tackle a current account deficit?

<p>It protects vulnerable industries from global competition (A)</p> Signup and view all the answers

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