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Inflation affects international trade competitiveness from "summary" of International Economics by Robert Carbaugh
When a country experiences inflation, it means that the general price level of goods and services is rising. This can have a significant impact on the competitiveness of the country's exports in the global market. As domestic prices rise due to inflation, the costs of production also increase. This makes goods and services produced in that country more expensive compared to those produced in countries with lower inflation rates. As a result, the country's exports become less competitive in the international market. Foreign consumers may choose to buy goods and services from countries with lower inflation rates, as they can offer similar products at lower prices. This can lead to a decrease in demand for the country's exports, which can have negative consequences for its economy. Inflation can also affect a country's imports. When domestic prices rise due to inflation, the cost of imported goods and services also increases. This can make imports more expensive for domestic consumers, leading to a decrease in demand for foreign goods. As a result, the country's trade balance may be affected, as it may import less and export more to compensate for the increased costs.- Inflation can have a negative impact on a country's international trade competitiveness. It can make its exports more expensive and its imports more costly, leading to a decrease in demand for its products in the global market. This can have implications for the country's trade balance and overall economic performance.
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