Questions: Which situation would require a country to decrease the value of its imports if it did not want to increase the amount of money it spent in trade? A. The value of the country's currency decreases relative to that of other countries. B. The country changes its trade policy to create a flexible exchange rate. C. The value of the country's currency increases relative to that of other countries. D. The country changes its trade policy to create a fixed exchange rate.

Which situation would require a country to decrease the value of its imports if it did not want to increase the amount of money it spent in trade?
A. The value of the country's currency decreases relative to that of other countries.
B. The country changes its trade policy to create a flexible exchange rate.
C. The value of the country's currency increases relative to that of other countries.
D. The country changes its trade policy to create a fixed exchange rate.
Transcript text: Which situation would require a country to decrease the value of its imports if it did not want to increase the amount of money it spent in trade? A. The value of the country's currency decreases relative to that of other countries. B. The country changes its trade policy to create a flexible exchange rate. C. The value of the country's currency increases relative to that of other countries. D. The country changes its trade policy to create a fixed exchange rate.
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Solution

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Answer

The answer is A. The value of the country's currency decreases relative to that of other countries.

Explanation
Option A: The value of the country's currency decreases relative to that of other countries.

When a country's currency depreciates, the cost of imports becomes more expensive because it takes more of the local currency to purchase the same amount of foreign goods. To avoid spending more money on trade, the country would need to decrease the value of its imports.

Option B: The country changes its trade policy to create a flexible exchange rate.

A flexible exchange rate allows the currency value to fluctuate based on market forces. This does not directly require a decrease in imports unless the currency depreciates significantly, which is covered in Option A.

Option C: The value of the country's currency increases relative to that of other countries.

If the currency appreciates, imports become cheaper, and there is no immediate need to decrease the value of imports to maintain the same level of spending.

Option D: The country changes its trade policy to create a fixed exchange rate.

A fixed exchange rate stabilizes the currency value against another currency or a basket of currencies. This policy change alone does not necessitate a decrease in imports unless other economic factors, like a currency depreciation, are involved.

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