Question 1a:

Write a brief paragraph describing how the world pricelevel can shift from P₀ to P₁ in aneconomy.

Question 1b:

What will the trade balance be after the world pricelevel moves to P₁ ? Write in a brief paragraph what iscausing the trade balance position.

Question 1c:

Over time what is likely to happen to the world pricelevel and the trade balance? Write a brief paragraph describingwhat is causing this movement.

Question 1d:

What can prevent the world price level from moving inthe way you described in question (C)? Write a brief paragraphdescribing the mechanics of how the world price level is preventedfrom moving in the way you described in question (C).

Transcribed Image Text:

Price 8° P₁ ģ Qo Domestic supply of goods Swo Q₂ SW₁ Domestic demand of goods Price 8° P₁ ģ Qo Domestic supply of goods Swo Q₂ SW₁ Domestic demand of goods

Answer rating: 100% (QA)

here are my answers to your questions about the image Question 1a The world price level can shift from P0 to P1 in an economy due to changes in either ... View the full answer