Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Chapter 33, Problem 35P

If trade increases world GDP by 1 % per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lanka’s GDP.

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Explain how the change in terms of trade accompanying growth can leave a country worse off after growth compared with its state of well-being prior to growth.
Proponents of free trade argue that that liberalisation of trade relationships between rich and poor countries would work towards the long-run benefits to all countries. Discuss whether the removal of all tariffs and other impediments to trade would be of assistance to the economic development of developing nations
Given free trade, small nations tend to benefit * :the most from trade since they Export Price Index Import Price Index Country 1990 2000 1990 2000 100 Mexico Sweden 220 100 200 100 160 100 150 155 Spain France 100 100 155 100 170 100 230 Denmark 100 120 100 125 Realize terms of trade lying near the MRTS of their large trading partners Are more productive than their large trading -partners Are less productive than their large trading partners Have demand preferences and income levels lower than their large trading partners

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