Question

If a rise in trade deficit results from a decrease in the quality of your country's products. a. How would this affect net exports at any given exchange rate? b. Use a three-panel diagram to show the effect of this shift in net exports on the real exchange rate and trade balance. c. Does a decline in the quality of your country's products have any effect on your standard of living? Give a clear elaboration with example or graphs or facts (Hint: When you sell goods to foreigners, what do you receive in return?)

          If a rise in trade deficit results from a decrease in the quality of your country's products.

 a. How would this affect net exports at any given exchange rate?

b. Use a three-panel diagram to show the effect of this shift in net exports on the real exchange rate and trade balance.

c. Does a decline in the quality of your country's products have any effect on your standard of living? Give a clear elaboration with example or graphs or facts (Hint: When you sell goods to foreigners, what do you receive in return?)

Added by Alina R.

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