Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 35, Problem 4E
To determine
Effects of Trade Diversion and Trade Creation if the whole world is in a free trade agreement.
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- 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 Lankas GDP.arrow_forwardDescribe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is economy in an economy that performs poorly. What key factor or factors are making the difference in the outcome that results from a trade surplus?arrow_forwardOccasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.arrow_forward
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