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How does economics impact international politics?
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Economics plays an important role in international politics by acting as a major factor in shaping policy and decision-making. The decisions and policies of governments in one country can cause a ripple effect of economic consequences on other countries, impacting their politics and policy as well. For instance, international trade regulations and tariffs can limit competition, which affects economies in both nation-states. Changes in monetary policy, such as changes to a nation’s currency or interest rates, can have profound political effects on other countries by influencing their buying and investing decisions. Economics also influences the ability of governments to finance public spending, with their budget and taxes having a direct impact on their capacity to finance service and economic development.