Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Exports increase due to higher production costs
B
Exports decrease as domestic goods become more expensive
C
Exports remain unchanged regardless of wage changes
D
Exports increase as workers have more disposable income
Understanding the Answer
Let's break down why this is correct
Answer
When real wages increase, workers earn more money after adjusting for inflation. This can lead to higher production costs for businesses, as they may need to pay their employees more. As a result, if companies raise their prices to cover these costs, their goods may become more expensive compared to products from other countries. This can make exports less attractive to foreign buyers, leading to a decrease in the quantity of goods sold abroad. For example, if a country's electronics become pricier due to higher wages, consumers in other countries might choose to buy cheaper electronics from competitors instead.
Detailed Explanation
When real wages go up, it costs more to make goods. Other options are incorrect because Some might think higher costs lead to more exports; It's a common belief that wages don't affect exports.
Key Concepts
real wages
exports
market equilibrium
Topic
Real Wages and Exports Impact
Difficulty
hard level question
Cognitive Level
understand
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