Factors affecting international trade balance

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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?

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

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

Lack of cheaper labor and deregulation (B) Signup and view all the answers

How are long term current account deficits typically funded?

By encouraging foreign direct investment (FDI) (D) 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?

Supply-side policies (A) 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?

Deflationary demand policies (B) Signup and view all the answers

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

Increasing costs of imports (B) Signup and view all the answers

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

Weakening of the exchange rate (B) Signup and view all the answers

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

Reduced productive efficiency in the UK (D) 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?

Marshall-Lerner condition (A) 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?

Supply-side policy (C) Signup and view all the answers

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

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

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

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

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

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

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

Higher prices having a regressive effect (D) Signup and view all the answers

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

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