Protectionist Policies in a Small Open Economy Do Not Alter

question 94

Multiple Choice

Protectionist policies in a small open economy do not alter the trade balance because the:

• A) quantity of imports and exports is fixed.
• B) interest rate adjusts to offset any reductions in imports.
• C) exchange rate appreciates to offset the increase in net exports.
• D) level of net capital outflow is fixed by the world interest rate.

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Definitions:

African Colonies

Territories in Africa that were under the control of European powers from the late 19th century to the mid-20th century.

Apartheid

A policy or system of segregation or discrimination on grounds of race implemented by the National Party government of South Africa from 1948 to 1994.

Otto von Bismarck

A German statesman who served as Prime Minister of Prussia and was the first Chancellor of the German Empire, known for his role in the unification of Germany.