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Economics (AS & A Level) · Oct / Nov 2021 · Paper 13 · Question 20

9708Protectionism

The demand for a country's exports is price-elastic. Its government introduces export subsidies. What will be the effect on its balance of trade and on its terms of trade?

  1. Abalance of trade: increase; terms of trade: increase
  2. Bbalance of trade: increase; terms of trade: decrease
  3. Cbalance of trade: decrease; terms of trade: increase
  4. Dbalance of trade: decrease; terms of trade: decrease

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Correct answer: B. balance of trade: increase; terms of trade: decrease

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