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40. The following appeared as part of an article in a weekly newsmagazine. The country of Sacchar can best solve its current trade deficit problem by lowering the price of sugar, its primary export. Such an action would make Sacchar better able to compete for markets with other sugar-exporting countries. The sale of Sacchars sugar abroad would increase, and this increase would substantially reduce Sacchars trade deficit. Discuss how well reasoned... etc. The author of this article argues that the country of Sacchar can best solve its current trade deficit problem by lowering the price of its main export, sugar. The line of reasoning is that this action would make Sacchar more competitive with other sugar-exporting countries, thereby increasing sales of Sacchars sugar abroad and, in turn, substantially reducing the trade-deficit. This line of reasoning is unconvincing for a couple of reasons. In the first place, this argument is based on an oversimplified analysis of the trade deficit problem Sacchar currently faces. A trade-deficit occurs when a country spends more on imports than it earns from exports. The authors argument relies on the assumption that earnings from imports will remain constant. However, the author provides no evidence that substantiates this assumption. It is possible that revenues from imports will increase dramatically in the near future; if so, the course of action proposed by the author might be unnecessary to solve Sacchars trade deficit problem. Conversely, it is possible that revenues from imports are likely to decrease dramatically in the near future. To the extent that this is the case, lowering sugar prices may have a negligible countervailing effect, depending on the demand for Sacchars sugar. | 
