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iF the exhange rate depreciates, the terms of trade
must worsen
must improve
may worsen
may improve

When do countries gain from trade?
When the terms of trade are more favourable than the domestic opportunity cost.
When the government subsidies production
When they have an absolute advantage in something

What is the condition for free trade to benefit all countries? Assume two goods and two countries.
Both countries produce different goods
Countries have similar resources
Terms of trade lie in between the two countries’ opportunity cost ratios.

Protectionism can always be justified where
The protectionist measures are envisaged as short term only
Countries want to create jobs at home
There are historical relations between countries

What will be the immediate effect of the removal of tariffs on imported consumer goods?
a decrease in the cost of living
a decrease in free trade
an increase in customs revenues received by the government
an increase in the level of domestic employment

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Experienced teacher of micro- and macro-economics

Tests Created: 11

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