In the basic model of a small open economy,if the government adopts a policy that lowers imports,then the quantity of exports:
A) remains unchanged.
B) decreases but not as much as the quantity of imports decreases.
C) decreases by exactly the same amount as the quantity of imports decreases.
D) decreases by more than the quantity of imports decreases.

Question

Quizplus · Accepted Answer

In a small open economy, the balance of trade must be maintained. If imports decrease, exports must decrease by the same amount to maintain the trade balance, assuming no changes in other factors like capital flows.

In the Basic Model of a Small Open Economy,if the Government