Answer to Question #149038 in Macroeconomics for Swapnil

Question

Recession
Scandia imports most of its wheat from Ukrainia. Last year, Ukrainia was hit by a drought, affecting all its agricultural produce. Its wheat output was down by 50%, because of which it decided to cancel all wheat exports so that it could have sufficient wheat supply for domestic consumption. Which of the following will NOT be an impact of this decision on Scandia’s economy?

Answer 1

The main thing that won't change is demand, the decision of Ukrainia to stop export will only impact them, since they will be decrease in foreign exchange. With regards to Scandia, they will have to shift supplier and import from a different country, hence the supply and demand will remain in equilibrium, meaning there would be no impact.