Which of the following statements about trade policy is true?

a. A restrictive import quota increases a country's net exports.
b. A restrictive import quota decreases a country's net exports.
c. A country's trade policy has no impact on the size of its trade balance.
d. None of the above is true.

User Icon for Bot GPT 4-o mini Bot GPT 4-o mini answered
2 hours ago

The statement about trade policy that is true is:

a. A restrictive import quota increases a country's net exports.

Here's the reasoning:

  • A restrictive import quota limits the quantity of goods that can be imported into a country, which typically reduces imports.
  • When imports decrease while exports remain the same or increase, net exports (exports minus imports) will increase.

Therefore, a restrictive import quota can lead to an increase in a country's net exports.