Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?
A unilateral approach is when a country removes its trade restrictions on its own. A multilateral approach is when a country removes its trade restrictions while other countries do the same. A multilateral approach has two advantages. The first is that it has the potential to result in freer trade because it can reduce trade restrictions abroad as well as at home. If international negotiations fail, however, the result could be more restricted trade than under a unilateral approach. Also, the multilateral approach may have a political advantage and can sometimes win political support when a unilateral reduction cannot.
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Research in the performance of developing nations with exchange rate pegs has shown that:
A) fixed exchange rates are 100% effective in curbing inflation and preventing hyperinflation. B) fixed exchange rates are 100% ineffective in curbing inflation and preventing hyperinflation. C) floating exchange rates are more effective in curbing inflation and preventing hyperinflation. D) fixed exchange rates are neither necessary nor sufficient to curb inflation and prevent hyperinflation.
According to Keynes, the key difference between money and bonds is that
A) money is an asset. B) bonds are an asset. C) money is less risky. D) bonds are tax exempt.