Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases exports because higher wages raise production costs.
B
It has no effect on exports regardless of production costs.
C
It increases exports by making goods cheaper for foreign buyers.
D
It increases exports because higher wages enhance productivity.
Understanding the Answer
Let's break down why this is correct
Answer
When real wages increase in a country, it often means that workers have more money to spend because their earnings are rising faster than the cost of living. This can lead to higher demand for goods and services, which might include both local products and imports. However, if wages rise significantly, the cost of producing goods in that country may also increase, making those goods more expensive compared to products from other countries. For example, if a country’s workers earn more, but the costs to produce shoes also go up, those shoes might become too expensive for foreign buyers. As a result, the country may export less because its goods are not as competitive in price on the global market.
Detailed Explanation
When real wages go up, workers earn more money. Other options are incorrect because Some might think that wages don't matter for exports; It's a common mistake to think that higher wages make goods cheaper.
Key Concepts
cost of living
Topic
Real Wages and Exports Impact
Difficulty
easy level question
Cognitive Level
understand
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