An increase in the use of quotas is expected to:
A) reduce the country's current account balance, if other governments do not retaliate.
B) increase the country's current account balance, if other governments do not retaliate.
C) have no impact on the country's current account balance unless other governments retaliate.
D) increase the volume of a country's trade with other countries.

Question

​An increase in the use of quotas is expected to:
A) ​reduce the country's current account balance, if other governments do not retaliate.
B) ​increase the country's current account balance, if other governments do not retaliate.
C) ​have no impact on the country's current account balance unless other governments retaliate.
D) ​increase the volume of a country's trade with other countries.

Quizplus · Accepted Answer

Quotas limit the quantity of goods that can be imported, which typically reduces imports and can lead to an increase in domestic production for the domestic market. If other governments do not retaliate, this can improve the country's current account balance by reducing the value of imports relative to exports.

​An Increase in the Use of Quotas Is Expected To

An Increase in the Use of Quotas Is Expected To