The cost of producing a car in Germany is 2,000 bushels of wheat, and the cost of producing a car in Canada is 1,200 bushels of wheat. The two countries can both benefit if the terms of trade are
a. greater than 2,000 of wheat per car
b. less than 1,200 bushels of wheat per car
c. between 1,200 bushels and 2,000 bushels of wheat per car, and Germany produces wheat
d. between 1,200 bushels and 2,000 bushels of wheat per car, and Germany produces cars
e. between 1,200 bushels and 2,000 bushels of wheat per car, and Canada produces wheat
C
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How does contractionary monetary policy affect net exports in the short run?
A) Contractionary monetary policy reduces exports and increases imports. B) Contractionary monetary policy increases exports and reduces imports. C) Contractionary monetary policy increases exports and increases imports. D) Contractionary monetary policy reduces exports and reduces imports.
What is the appropriate monetary policy response to a situation with deficient financial liquidity, when there is a liquidity trap?
A) an open market sale of government bonds B) a decrease in the interest rate on reserves C) an open market purchase of government bonds D) an increase in the interest rate on reserves