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Chapter 10: Q 35. (page 267)

If countries reduced trade barriers, would the

international flows of money increase?

Short Answer

Expert verified

Yes, this is true.

Step by step solution

01

Step 1. Definition

Trade barriers are defined as the restrictions on international trade imposed by the government. This is a protectionist approach to the economy in order to help domestic producers.

02

Step 2. 

When a country reduces its trade barriers the flow of money internationally increases.

When trade barriers are reduced, there will be more international trade in goods and services. The international flow of payments increases, and the international flow of financial investments (going in the opposite direction of the trade flow) also increases.

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Most popular questions from this chapter

Does a trade surplus help to guarantee strong economic growth?

If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?

Many think that the size of a trade deficit is due

to a lack of competitiveness of domestic sectors, such as autos. Explain why this is not true.

In 2001, the United Kingdom's economy exported

goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from the United Kingdom to the rest of the world were £23 billion, while various U.K government agencies received payments of £16 billion from the rest of the world.

a. Calculate the U.K. merchandise trade deficit for

2001.

b. Calculate the current account balance for 2001.

c. Explain how you decided whether payments on

foreign investment and government transfers

counted on the positive or the negative side of

the current account balance for the United

Kingdom in 2001.

What is more important, a country’s current

account balance or GDP growth? Why?
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