Starting from a situation where country A which exports good S and imports good T has a larger trade triangle than country B, explain how the process of reciprocal demand leads to international trade equilibrium
What will be an ideal response?
If A has a larger trade triangle than B it wants to trade more than B. Consider the S market. A's desired exports exceed B's desired imports. The price of S must fall. As this occurs, the two trade triangles move toward congruency.
Economics
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