When a Developing Country Relies on Import Substitution

question 83

Multiple Choice

When a developing country relies on import substitution,

• A)it sacrifices the gains from specialization and comparative advantage
• B)replaces low-cost foreign goods with high-cost domestic goods
• C)domestic producers, shielded from foreign competition, usually fail to become efficient
• D)other countries often retaliate with their own trade restrictions
• E)All of the answers are correct

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Definitions:

Fair-Value Hedge

A hedge of the exposure to changes in fair value of an asset or liability or an identified portion of such an asset or liability that is attributable to a particular risk.

Exchange Gain

A profit arising from changes in foreign exchange rates that benefit the value of a company's foreign currency denominated assets or liabilities.

April 30 Year-End

A fiscal year or financial reporting period that concludes on April 30th, often used by companies or organizations for tax or reporting purposes.

Cash-Flow Hedge

A financial strategy used to manage risks associated with the fluctuations in cash flows due to changes in exchange rates, interest rates, or commodity prices.