📚 Learning Guide
Real Wages and Exports Impact
easy

How does an increase in real wages generally affect the purchasing power of consumers regarding exports?

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Choose the Best Answer

A

It decreases purchasing power, leading to reduced exports.

B

It increases purchasing power, allowing consumers to buy more exports.

C

It has no effect on purchasing power or exports.

D

It only affects domestic consumption, not exports.

Understanding the Answer

Let's break down why this is correct

Answer

When real wages increase, it means that people have more money to spend because their income has risen while prices for goods and services have not gone up as much. This increase in income allows consumers to buy more products, including those from other countries, known as exports. For example, if a person receives a raise and can now afford to buy a new smartphone from another country, this boosts demand for that exported product. As more people can afford to buy these goods, it can lead to an increase in exports for the country producing them. Overall, higher real wages can strengthen the purchasing power of consumers, encouraging them to buy more imported goods.

Detailed Explanation

When real wages go up, people have more money to spend. Other options are incorrect because Some might think that higher wages mean less money for exports; It's a common mistake to think wages don't change anything.

Key Concepts

purchasing power
Topic

Real Wages and Exports Impact

Difficulty

easy level question

Cognitive Level

understand

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