secondary burden of consumption loan.
Not what you're looking for?
See attached file for full problem description.
2. Suppose that the preference of country A and country B differs, but that each is inflexible: country A consumes food and clothing in proportion 2:1 (at any prices), while country B always consumes food and clothing in equal proportions (1:1). The two countries have identical bowed-out production possibilities frontier. What happens to country A's terms of trade if it makes a consumption loan to country B? Is there a secondary burden of the loan?
Purchase this Solution
Solution Summary
Will there be a secondary burden of consumption loan?
Solution Preview
Please see the attached file.
Solution:
Country A consumes food & clothing in proportions 2:1, the opportunity cost of food & clothing will be as follows.
Opportunity cost of food = ½ cloth
...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.