Question

why do smaller economies around the world typically face more volatile inflation?
they can be unsettled by international movements of capital and goods
they address inflation concerns without restricting trade and thus lose benefits
businesses are distracted from focusing on real productivity gains
the fundamentals of growth are the same in every country
question 12 (1 point)
listen
of all the arguments for placing limitations on trade, which of the following would most likely be characterized as being the most controversial among economists?
bank/financial sector regulation argument
floating currency argument
the infant industry argument
quantitative easing argument

Explanation:

First Question (Inflation in Smaller Economies)

• Option 1: Smaller economies have less capital and goods market depth, so international capital/goods movements (like sudden inflows/outflows, price shocks) can disrupt their economies, causing volatile inflation.
• Option 2: Addressing inflation without trade restrictions doesn't directly explain volatility; it's about trade benefits, not inflation volatility.
• Option 3: Distraction from productivity is about growth, not inflation volatility.
• Option 4: Growth fundamentals being same doesn't relate to inflation volatility.

• The infant industry argument (protecting new industries with tariffs/quotas) is controversial. Some economists support it for helping industries grow, but others argue it leads to inefficiency, rent - seeking, and harms consumers.
• Bank/financial regulation is about finance, not trade limitations.
• Floating currency is about exchange rates, not trade limits.
• Quantitative easing is monetary policy, not trade - related.

Answer:

they can be unsettled by international movements of capital and goods

Second Question (Controversial Trade Limitation Argument)