Question: Part IV: The Standard Trade Model 1 . Graphically show how the equilibrium of relative prices, the mix of consumption, and the mix of output

Part IV: The Standard Trade Model

1 .

Graphically show how the equilibrium of relative prices, the mix of consumption, and the mix of output are determined when two countries trade freely.

2 .

Define terms of trade.

3 .

Define export

-

biased growth.

4 .

Define import

-

biased growth.

5 .

How does a countrys economic growth affect the welfare of the rest of the world under free trade?

6 .

Why is the intertemporal production possibility frontier bowed outward?

7 .

What is the price of the current consumption relative to that of the future consumption?

8 .

Derive the intertemporal budget constraint.

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