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Chapter 23: Q. 35 (page 577)

If countries reduced trade barriers, would the international flows of money increase?

Short Answer

Expert verified

The international flow of money increases as the countries reduced trade barriers.

Step by step solution

01

Step 1. Reason

Because trade barriers increase the cost of exports and imports for a firm by increasing transportation and communication costs, the international flow of money increases as trade barriers are reduced by governments.

02

Step 2. Result of reduced trade barriers

Reduced trade barriers result in lower transportation and communication costs, as well as lower export and import prices. Other countries will be more likely to buy more at a lower price, resulting in increased exports and imports. As a result of the reduced trade barriers, the international flow of money increases.

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