Historically, China has devalued its currency, which has made exports to the US

Question

Historically, China has devalued its currency, which has made exports to the US cheaper. In essence, they were giving the US a discount on their products. Economists have argued that the Chinese were willing to do this because it sent high-tech manufacturing jobs, like Apple, into China. When producing Apple products, China was able to reverse engineer the production process and adapt that technology into their own products and manufacturing sectors.

This transfer of knowledge, a byproduct of manufacturing high-tech products for the US, is a ___________________ of the production process to China.

A. Market Power

B. Negative Externality

C. Positive Externality

D. Inflation

Explanation / Answer

In the question given above the transfer of knowledge that comes from setting high technology industries in China is used by a third party ( Since the Chinese government who devalued their currency is the first party and the high technology industry is the second party) who use these technologies for their profit. This type of advantages or benefits that is enjoyed by the third party during a financial transaction is known as positive externality. Therfore option “c” is correct.

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.