6) Suppose that a country experiences growth strongly biased toward its export, clothA) this will tend to worsen the country's terms of trade.B) this will tend to improve the country's terms of trade.C) this will tend to leave the country's terms of trade unchanged.D) this will tend to worsen the terms of trade for the country's trading partner.E) this will increase the price of cloth relative to the imported good.
Question
- Suppose that a country experiences growth strongly biased toward its export, clothA) this will tend to worsen the country's terms of trade.B) this will tend to improve the country's terms of trade.C) this will tend to leave the country's terms of trade unchanged.D) this will tend to worsen the terms of trade for the country's trading partner.E) this will increase the price of cloth relative to the imported good.
Solution
If a country experiences growth strongly biased toward its export, it means that the country is producing and exporting more of that particular good. In this case, the good is cloth.
So, the correct answer is:
B) this will tend to improve the country's terms of trade.
Explanation:
B) This will tend to improve the country's terms of trade: When a country increases its production and export of a particular good, it can lead to an improvement in the terms of trade. The terms of trade is the ratio of export prices to import prices. If the price of the exported good (cloth) increases due to increased demand, and the price of the imported goods remains the same, the terms of trade improve. This is beneficial for the country as it gets more imports for each unit of export.
Similar Questions
5) Suppose that a "small country" experiences growth strongly biased toward its export, clothA) this will tend to worsen the country's terms of trade.B) this will tend to improve the country's terms of trade.C) this will tend to worsen terms of trade for the country's trading partner.D) this will tend to improve terms of trade for the country's trading partner.E) this will have no effect on terms of trade for the country's trading partner
1) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in theinternational marketplace, thenA) all countries would be better off.B) the terms of trade of cloth exporters will improve.C) the terms of trade of food exporters will improve.D) the terms of trade of all countries will improve.E) the terms of trade of cloth exporters will worsen.
10) An export subsidy will cause the term of trade of the ________ country to ________ andwill ________ the countryA) importing; suffer; benefitB) exporting; improve; benefitC) importing; improve; harmD) importing; suffer; harmE) exporting; suffer; harm
When the terms of trade risesGroup of answer choicesThe relative prices of export goods decreaseConsumers who prefer foreign goods are better off.The price index of import goods increasesThe country is unambiguously worse off
A country that imposes a tariff on imported goods is most likely to experience which benefit?A.Working conditions for domestic workers will improve relative to other countries.B.A wider variety of imported products will become available to consumers.C.The country will begin producing goods more efficiently than other countries.D.Goods produced by domestic companies will be cheaper than competing imports.
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