Author Question: Which of the following statements concerning the International Monetary Fund is true? a. The IMF ... (Read 86 times)

itsmyluck · **on:** Jun 30, 2018

Which of the following statements concerning the International Monetary Fund is true?
a. The IMF was created to help finance economic development in poor countries.
b. One of the principal aims of the IMF is to discourage international trade and encourage countries to become self-sufficient.
c. The IMF lends money to countries experiencing large balance-of-payments surpluses.
d. When the IMF lends currencies, it always insists on the borrowing country taking action to reduce its balance-of-payments surplus.
e. The IMF obtains funds from annual membership fees charged to member countries.

Question 2

Trade restrictions will stop foreign imports, which will increase American employment and protect American jobs. Most economists realize this argument is wrong. Can you explain why?

mochi09 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

e

Answer to Question 2

Trade restrictions will stop foreign imports, but this means that foreigners will no longer have the dollars that those imports used to generate. With fewer dollars, foreigners will buy fewer American goods (since this is virtually the only thing that dollars are good for). We expand production in areas in which we have a comparative disadvantage. At that same time, production and employment in the exports for which we do have a comparative advantage will suffer. Trade restrictions only protect jobs in industries that compete with imports; they destroy jobs in export industries.