Country X Wheat (Bushels/ ppc ppc, 0 1 3 57 9 11 13 2 4 6 8 10 12 T-shirts 5. Th
ID: 2441932 • Letter: C
Question
Country X Wheat (Bushels/ ppc ppc, 0 1 3 57 9 11 13 2 4 6 8 10 12 T-shirts 5. The figure above represents the evolving situation of Country X. ppc, represents possibility curve for Country X in year 1. ppc, represen in year 2 the production ts the production possibility curve for Country X th Country X experiences between years I and 2 biased or balance growth? Briefly explain. b. What is Country X's terms of trade in year 1? In year 2? (Give numerical answers and be sure to state the imported and exported good.) c. Is Country X large or small? Briefly explain. d. Does Country X's growth increase or decrease its willingness to trade? Briefly explain.Explanation / Answer
a) Country X experiences biased growth between years 1 and 2. This is because the growth of wheat rises from 7 to 10 bushels per year and the growth of T-shirts rises from 10 to 12 per year. Thus the growth is more biased towards wheat which has risen more than T-shirts.
b) Terms of Trade = Index of Export prices / Index of Import Prices * 100
As the country produces more of wheat and less of T-shirts, so it will export wheat and import T-shirts.
Thus Terms of Trade = Price of Wheat / Price of T-shirts * 100
c) Country X is small as the level of production is small.
d) Country X's growth increases its willingness to trade as it is showing consistent growth in the manufacturing and thus would be willing to export to earn foreign revenue.