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Free trade based on specialisation leads to higher world incomes for all where:
Terms of trade lie in between domestic opportunity cost ratios
Countries all follow absolute advantage
Transport costs are high

Since 2000 a country’s export prices have increased on average by 50 % and its import prices by 25 %.What is the current figure for the country’s terms of trade?
75
83
120
125

If the price of exports rise, which one must be true?
BoP must improve
Terms of trade must worsen.
BoP must worsen
Terms of trade must improve

A country entering a Customs Union causes
Trade diversion away from goods consumed from countries traded with before
Trade creation with members of the union
Both 1 and 2 above

Toyota building a factory in UK would most probably lead to :
Improvement I UK’s BoP in short-term
Worsening of current account in long-term
Improvement in current account in long term
None of the above

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Experienced teacher of micro- and macro-economics

Tests Created: 11

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