What is the cost ratio of capital goods to consumer goods in Germany? What is the cost ratio of capital goods to consumer goods in France? Solve for a terms of trade ratio that will be mutually beneficial for both nations so that they will want to engage in trade with one another.

What is the cost ratio of capital goods to consumer goods in Germany? What is the cost ratio of capital goods to consumer goods in France? Solve for a terms of trade ratio that will be mutually beneficial for both nations so that they will want to engage in trade with one another.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 18RQ: What is deflation?

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Question

What is the cost ratio of capital goods to consumer goods in Germany? What is the cost ratio of capital goods to consumer goods in France?
Solve for a terms of trade ratio that will be mutually beneficial for both nations so that they will want to engage in trade with one another.

Germany
Option Consumer Goods Capital Goods
0
ABCDE
400,000
300,000
200,000
100,000
0
25,000
50,000
75,000
100,000
France
Consumer Goods Capital Goods
0
1,200,000
900,000
600,000
300,000
0
150,000
300,000
450,000
600,000

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