The Standard Trade Model Flashcards
1
Q
Which four key relationships is The Standard Trade Model build on?
A
- The relationship between the production possibility frontier and the relative supply curve.
- The relationship between relative prices and relative demand.
- The determination of world equilibrium by world relative supply and world relative demand.
- The effects of the terms of trade on a nation’s welfare.
2
Q
What line can indicate the market value of output?
A
An isovalue line.
3
Q
What does the value of an economy’s consumption equal?
A
Its production
4
Q
What is the slope of an isovalue line equal to?
A
- Pc/Pf
5
Q
How is Terms of Trade defined?
A
The price of the good a country initially exports divided by the price of the good it initially imports
6
Q
How dies a rise in the Terms of Trade affect welfare?
A
It increases welfare.
7
Q
When does Biased Growth happen?
A
When growth makes the production possibility frontier shift out more in one direction in the other.
