Mauritius, an Island Off the Coast of Africa, Competes with Other

question 250

Multiple Choice

Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that its "... factories have been exposed to ... competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume ..." www.ft.com, 3/13/2006
The decrease in exports will cause ________ and the price level will ________.

• A) a downward shift in the AE curve; decrease as the AD curve shifts leftward in the short run
• B) an upward shift in the AE curve; increase as the AD curve shifts rightward in the long run
• C) a leftward shift in the AD curve; fall in the short run and rise in the long run
• D) a leftward shift in the AD curve; rise in the long run as goods become more scarce

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Definitions:

Real GDP

The measure of a country's gross domestic product adjusted for inflation, reflecting the value of all goods and services produced at constant prices.

Equity Finance

A method of raising capital through the sale of shares in a company, representing ownership interests in the corporation.

Investment

The allocation of resources, typically money, into ventures, stocks, or assets with the expectation of generating a profit.

Types of Saving

Various forms in which individuals or entities can save their money, such as bank deposits, investments, or pension funds.