Question

"XYZ Country" is run by a government that encourages domestic companies to produce and export as many products as they can in order to bring in revenues from outside of the country. In addition, XYZ Country has enacted numerous tariffs on products made in other countries that are imported into its country for sale to make prices on these foreign-made products so high that XYZ citizens cannot afford to purchase them. By doing this, XYZ Country hopes to purchase them. By doing this, XYZ Country hopes to increase the net amount of currency that stays in its country.

Which theory of international trade is XYZ's government most likely following?
A Theory of Mercantilism
B National Competitive Advantage Theory
C New Trade Theory
D Theory of Comparative Advantage
E Theory of Absolute Advantage

Answer 1

XYZ Country's government is most likely following the theory of Mercantilism, which advocates for government regulation of the economy to maximize wealth and increase the net amount of currency that stays in the country.

Step-by-step explanation:

XYZ Country's government is most likely following the theory of Mercantilism. Mercantilism is a theory of international trade that advocates for government regulation of the economy to maximize wealth and increase the net amount of currency that stays in the country. XYZ Country's government encourages domestic production and exports, while imposing high tariffs on imported goods to protect domestic industries and promote self-sufficiency.