📚 Learning Guide
Inflation and Trade Effects
easy

Inflation in a country is to the price of domestic goods as a rise in export costs is to what?

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Learning Path
Learning Path

Question & Answer
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Understand Question
2
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3
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Choose the Best Answer

A

The demand for imported goods

B

The stability of foreign currency

C

The attractiveness of foreign markets

D

The overall trade balance

Understanding the Answer

Let's break down why this is correct

Answer

Inflation in a country means that the prices of goods and services are increasing, making it more expensive for people to buy everyday items. Similarly, when export costs rise, it can lead to higher prices for goods that are sold to other countries. This means that if a country has to pay more to produce or ship its products, those costs may be passed on to the buyers abroad, leading to higher prices for those imported goods. For example, if a country exports coffee and the cost of labor and shipping increases, the price of coffee in other countries may also go up. In both cases, whether it's inflation or rising export costs, the result is that consumers end up paying more for what they buy.

Detailed Explanation

When export costs go up, it can make a country's goods less appealing to other countries. Other options are incorrect because Some might think that higher export costs would increase the need for imports; It's easy to confuse export costs with currency stability.

Key Concepts

Inflation and its effect on prices
International trade dynamics
Export levels
Topic

Inflation and Trade Effects

Difficulty

easy level question

Cognitive Level

understand

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