econ353-2009fall-ps4answers

econ353-2009fall-ps4answers - METU/FEAS Econ 353 Hakan...

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METU/FEAS 24.11.09 Econ 353 Hakan Ercan Tuna GONULDAS Gorkem KARABAYIR PROBLEM SET 4- ANSWERS PART A: MULTIPLE CHOICES 1-B 2-A 3-B Offer curve of Country 1 shifts diagonally to the left while offer curve of Country 2 shifts diagonally to the up. Since terms of trade line becomes steeper, this reflects an improvement in the terms of trade of Country1 while change in volume trade is unambiguous. 4-C 5-D 6-C 7-A 8-A 9-C (At tt1, Korea wants to trade at point B, to sell 35 units of radio and to buy 20 units of tools. However, at this lower relative price of for radio, Germany would like to trade at point C. It would like to buy 46 units of radio and sell 26 units of tools. Therefore, at tt1, there is an excess demand for radio of the amount 11 (=46-35) and the excess supply of tools of the amount 6 (= 26-20). The excess demand for radio will bid up its price on the world market therefore the relative price ratio (Pr/Pt) will rise which means price line becomes steeper. PART B FILL IN THE BLANKS
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econ353-2009fall-ps4answers - METU/FEAS Econ 353 Hakan...

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