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???? ???Google Dici × ? M Richard II · Google Dici Richard it-X Richard il . × xAplia: Stude. X om/af/servlet/quizžquiz action-takeQuiz&iquiz;_probGuid ONAPCOA80101000000407c5c300400008 ctx 1. The effects of an unsuccessful trade pollcy on the price of rice Mblais Aa Aa that imports are bad Political debate about foreign trade often focuses on job loss. Partidpants frequently suggest because they destroy jobs and exports are good because they create jobs. Why, then, do governments sometime limit exports? Economic analysis reveals a basic point that the political debate misses: Restrictions on either imports or exports affect the domestic economy by changing prices and wages. Whether a trade restriction pushes prices up or down there is always someone in the economy who benefits. Buyers and sellers each have an incentive to lobby for trad restrictions that move prices in the direction that helps them. The government itself can also benefit from trade restrictions that move prices to its advantage. The accompanying news article describes a failed attempt by the government of the Republic of the Union of Myanmar (also known as Burma) to change its trade policy. As you read the article, pay attention to the effects of this change on the price of rice, and then answer the question that follows Read the article from The Financial Times in the following box and then answer the questions that follow. Burma's Rice Policy Chaos Sows Economic Seeds of Doubt By Amy Kazmin, The Financial Times February 14, 2004 For years, Burma's military exercised tight controls over the politically sensitive rice trade to ensure a steady supply of affordable rice in the cities and to collect the foreign exchange generated by rice exports. Its interventions into the grain trade-which began as part of the "Burmese Way to Socialism" crafted by the eccentric former dictator, Ne Win-depressed prices paid to farmers, devastating rice production in what was once the "rice basket of Asia." Source: SXC.hu

Explanation / Answer

Usually large crop harvest often leads to price drops due to simple Demand- Supply principles, where if a supply for a thing increases, the demand for the same is not able to cope up to high supply, leading to price reduction.

However, in case of Burma, the same does not appear to be the case. In spite of a bumper rice harvest, the anticipated action of the price of rice will be falling. However, Burma's local people, Junta, in the fear that exporters would buy rice only to import the same would lead to reduction in supply of Rice in the local market, which in turn would lead to higher price of rice in Burma as demand and supply would match on an equal level..

Thus, Junta feared that price would rise because Exporters buying rice for foreign sales could drive up demand.

Hence, correct option is OPTION B.

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