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Countries are indulged in trade because there are mutual gains from trade. But then, what are these gains which they obtain, and how are these realized? Comparative advantage theory provides the answers to such questions. The theory says that countries will gain by specializing in it and then exporting the good they have a comparative advantage or lower opportunity of the cost advantage in.
Q. An export subsidy has the reverse effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the
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Explain the complexities in the annalysis of balance of payment equilibrium
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