📚 Learning Guide
Inflation and Trade Effects
medium

When inflation rises significantly, such as a 25% increase in electric vehicle prices, it primarily affects international trade by altering the __________ of goods, which can lead to decreased exports as foreign buyers are deterred by higher costs.

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

demand

B

relative prices

C

supply

D

production costs

Understanding the Answer

Let's break down why this is correct

Answer

When inflation rises significantly, like a 25% increase in electric vehicle prices, it primarily affects the cost of goods. This means that the prices of these vehicles become much higher for everyone, including international buyers. As a result, foreign buyers may choose not to purchase these electric vehicles because they can find cheaper alternatives elsewhere. This decrease in demand from other countries can lead to fewer exports, which can hurt the economy of the country that produces these vehicles. For example, if a country known for electric cars raises its prices, other countries might turn to manufacturers in places where vehicles are still affordable, leading to a drop in exports.

Detailed Explanation

Relative prices show how much one good costs compared to another. Other options are incorrect because Some might think demand changes when prices rise; Supply refers to how much of a product is available.

Key Concepts

Inflation and its effect on trade
Relative pricing in international markets
Export levels
Topic

Inflation and Trade Effects

Difficulty

medium level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.