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Unformatted text preview: similar to A if their rises the value of what is produced in the U.S. goes up. This is one way to see that a higher relative price of oil (i.e. a decrease in P / f P ) works just like a negative shock to A in the U.S. . 2. Terms of Trade Shocks and the Trade/Current Account Balance Based on the analogy we just established between P / f P and A , they should have similar effects on the trade/current account balance over the business cycle. 3. The Relative Price of Oil and Oil-Exporters Current Account Balance For temporary spikes in the relative price of oil, the saving eff ect should dominate, producing trade surpluses for exporters and trade deficits for importers. Table 17.1...
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