A small country in Central America previously produced all of their own clothing because they have a strong textiles industry. Recently, they began importing clothing from Philippines, Vietnam, and Bangladesh. What is the likely result?
A) The importing country will have fewer choices of clothing.
B) The importing country will experience higher clothing prices.
C) The importing country will shift additional resources into their own textile industry.
D) The importing country will likely shift resources from textiles to a higher value industry.
E) The importing country will export less overall.
Question 2
Exchange rates between countries are usually determined by:
A) a number of factors including interest rates, inflation, and imports/exports for the countries.
B) the average interest rates for the two countries plus GDP.
C) inflation in the first country, divided by interest rate in the second country.
D) an agreement between the two countries plus an interest rate exchange.
E) the International Monetary Fund.
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