Suppose Canada can produce either 300 tons of paper or 200 HDTVs, and India can produce either 200 tons of paper or 100 HDTVs. The terms of trade between the two countries will lie between
A. 1/2 and 2/3 of an HDTV per ton of paper.
B. 1/2 and 1 HDTV per ton of paper.
C. 1/3 and 2/3 of an HDTV per ton of paper.
D. 1/3 and 1/2 of an HDTV per ton of paper.
Answer: A
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A) procyclical, just like nominal interest rates. B) acyclical, while nominal interest rates are procyclical. C) acyclical, just like nominal interest rates. D) countercyclical, while nominal interest rates are procyclical.
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