How does a move from no free trade to international free trade alter production and consumption in both the importing and exporting country in a two-country world?
What will be an ideal response?
POSSIBLE RESPONSE: The move from no trade to a free-trade equilibrium changes the product price from its no-trade value to the free-trade equilibrium international price or world price. The price change in each country results in changes in quantities consumed and produced. In the country importing the product, trade raises the quantity consumed and lowers the quantity produced of that product. In the exporting country, trade raises the quantity produced and lowers the quantity consumed of the product.
You might also like to view...
The more human capital workers have, the:
A. less productive they are. B. more productive they are. C. lower the value of their marginal product. D. more technology they will require for their job.
The classic example used to discuss the problem of adverse selection is:
A. fruit and produce markets, such as lemons. B. drivers with insurance who tend to drive more recklessly. C. the imbalance of information that exists between a buyer and seller of a used car. D. workers who shirk when their effort isn't closely monitored.
Every month when the Bureau of Labor Statistics (BLS) announces the unemployment rate, it also announces the number of jobs the economy has gained or lost. Where does the BLS get the data about jobs?
a. from the survey of 60,000 households, which is called the Current Population Survey b. from the Establishment Survey that measures both frictional and structural unemployment c. from the survey of 160,000 business that have over 40 million workers on their payrolls d. from the Congressional Budget Office, which also calculates the GDP of the United States
Keynesian policy:
A. promotes spending more and taxing less to boost economic activity to potential GDP. B. refers to fiscal policy. C. refers to policies that actively shift aggregate demand in an effort to reach full employment. D. All of these are true.