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Q. Other things being equal, a rise in a country's terms of trade enhances its welfare. What could happen if we relax the ceteris paribus assumption, and allow for the law of demand to operate internationally?
Answer: Let us presume that the terms of trade or technically the net commodity terms of trade improve therefore the relative price of a country's exports increase. This would reasonably lead to a shift away by world consumers to alternative goods. If the demand (requirement) for a country's exports is flexible, the quantity decrease likely proportionally larger than the per unit price increase. This term of trade effect would essentially lower the country's real income and economic welfare.
Q. The Specific Factors model clearly illustrates how the expansion of trade can have significant distributional effects on the relative incomes of different factors of productio
Q. Explain why in exchange rate-based stabilization plan may result in a real appreciation? Answer: annotation 8 gives three reasons: first, persistent inflation because of s
een subject to a discrimination complaint as a result of their recent recruitment campaign- They told the recruitment agency that they were looking for ‘young women with flair'' to
Q. Explain Purchasing Power Parity. Answer: PPP () states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels.
Difference between net barter terms of trade and gross barter terms of trade
tion..What is the range of gross barter terms of trade ?
Offer curves with example and explabation
Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p
Q. Using the diagram, show what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two coun
Q. Discuss the problems that the EMU will face in the coming years. Answer: Europe isn't an optimum currency area so asymmetric economic developments within different cou
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