Imagine the world having two countries producing wheat and cloth, with no difference in preferences across the two countries. If the home country—exporting cloth—experiences a growth strongly biased...


Imagine the world having two countries producing wheat and cloth, with no difference in preferences across the two countries. If the home country—exporting cloth—experiences a growth strongly biased towards it, what would happen to the home country’s terms of trade? How would the terms of trade be affected if the home country’s production grows in favor of wheat?



Jan 14, 2022
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