| What would be the consequences of increasing the export subsidies? |
| 1. The exports would become cheaper. |
| 2. Exports would become more competitive. |
| 3. There would be more inflow of foreign exchange. |
| 4. The domestic sectors of the country to which the subsidised goods are exported to, would be adversely affected. Which of the above statements is or are correct? |
A) 1, 2, 3
B) 1, 2, 4
C) 2, 3, 4
D) 1, 2, 3, 4
Correct Answer: B
Solution :
[b] The inflow of foreign exchange would depend on other factors too, simply subsidizing the exports can only make them more cost competitive, however the target nations have the right to levy heavy import duties on the subsidized goods thus regulating the trade and checking the foreign exchange flow.
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