Consider a small open economy that produces and consumes two goods: textiles and technology. The country has experienced a technological breakthrough in textile manufacturing, increasing its productivity. At the same time, the global demand for technology, the country's other export, has decreased. Analyze the following: a) How would the technological breakthrough in textile manufacturing affect the country's production possibility frontier? b) What could be the short-term and long-term effects on the country’s terms of trade? c) Discuss how the decrease in global demand for technology could influence the country's export revenues and economic growth. d) Propose one policy measure the government could take to mitigate any negative impacts on the economy due to these changes."
Consider a small open economy that produces and consumes two goods: textiles and technology. The country has experienced a technological breakthrough in textile manufacturing, increasing its productivity. At the same time, the global demand for technology, the country's other export, has decreased. Analyze the following: a) How would the technological breakthrough in textile manufacturing affect the country's production possibility frontier? b) What could be the short-term and long-term effects on the country’s terms of trade? c) Discuss how the decrease in global demand for technology could influence the country's export revenues and economic growth. d) Propose one policy measure the government could take to mitigate any negative impacts on the economy due to these changes."
Chapter1: Making Economics Decisions
Section: Chapter Questions
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"Consider a small open economy that produces and consumes two goods: textiles and technology. The country has experienced a technological breakthrough in textile manufacturing, increasing its productivity. At the same time, the global demand for technology, the country's other export, has decreased. Analyze the following:
a) How would the technological breakthrough in textile manufacturing affect the country's production possibility frontier?
b) What could be the short-term and long-term effects on the country’s terms of trade?
c) Discuss how the decrease in global demand for technology could influence the country's export revenues and economic growth .
d) Propose one policy measure the government could take to mitigate any negative impacts on the economy due to these changes."
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VIEWStep 2: Examine how would the breakthrough affect the country's production possibility frontier
VIEWStep 3: Examine the short-term and long-term effects on the country’s terms of trade
VIEWStep 4: Discuss the effect on the country's export revenuues and economic growth
VIEWStep 5: Propose one policy measure the government could take
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