Which statement best explains the effect of trade policies on the trade balance?
A) Trade policies alter the trade balance because they alter imports of the country that implemented them.
B) Trade policies alter the trade balance because they alter net capital outflow of the country that implemented them.
C) Trade policies do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.
D) Trade policies do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.

Question

Quizplus · Accepted Answer

Trade policies do not alter the trade balance because they do not affect national saving or domestic investment, which are the primary determinants of the trade balance.

Which Statement Best Explains the Effect of Trade Policies on the Trade