Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It makes exports more expensive for foreign buyers
B
It reduces production costs for exporters
C
It has no impact on international trade
D
It increases demand for exports by lowering prices
Understanding the Answer
Let's break down why this is correct
Answer
When a country experiences an increase in inflation, the prices of goods and services within that country tend to rise. This means that products made in that country become more expensive for foreign buyers. As a result, exports may decrease because other countries can find cheaper alternatives elsewhere. For example, if a country’s inflation rate rises and its products cost more, a foreign buyer might choose to purchase similar products from another country that has lower prices. Therefore, high inflation can lead to a decline in a country's competitiveness in the global market, negatively impacting its exports.
Detailed Explanation
When inflation rises, prices go up. Other options are incorrect because Some might think that higher inflation lowers costs for making goods; It's a common belief that inflation doesn't change trade.
Key Concepts
Inflation and its effect on trade
Price elasticity of demand in international markets
Exchange rates
Topic
Inflation and Trade Effects
Difficulty
easy level question
Cognitive Level
understand
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