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Impacts in terms of Trade

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Japan primarily exports manufactured goods, while importing raw materials such as food and oil. Analyze the impact on Japan's terms of trade of the following events:

a. A war in the Middle East disrupts oil supply.

b. Korea develops the ability to produce automobiles that it can sell in Canada and the United States.

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Solution Summary

The solution gives a clear and concise answer to the question being asked. The solution analyzes Japan's terms of trade by first briefly defining what terms of trade means. Then it evaluates the options given in the question and determines what impact those options will have on the terms of trade. The answer is brief and to the point with not much explanation. If the student is looking for a few lines, then this is an ideal solution for the student. If however, the student wants an detailed explanation, then this might not be the right solution to download.

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TOT (terms of trade) = Price of exported goods / Price of imported goods

a) The Middle East countries are LARGE oil exporting countries, so changes in their output will affect the ...

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