From an economic point of view, India and China are somewhat similar: Both are huge, low-wage countries, probably with similar patterns of comparative advantage, which until recently were relatively closed to international trade. China was the first to open up. Now that India is also opening up to world trade, how would you expect this to affect the welfare of China? Of the United States? (Hint: Think of adding a new economy identical to that of China to the world economy.) A. From China's perspective, the world relative supply curve will shift to the left. This shift will improve China's terms of trade. The U.S. purchases of Chinese exports will hurt the U.S. by decreasing the relative price of goods that the U.S. exports. B. From China's perspective, the world relative supply curve will shift to the right. This shift will worsen China's terms of trade. The U.S. purchase of Chinese exports will benefit the U.S. by increasing the relative price of goods that the U.S. exports. C. From China's perspective, the world relative supply curve will shift to the left. This shift will worsen China's terms of trade. The U.S. purchase of Chinese exports will benefit the U.S. by increasing the relative price of goods that the U.S. exports. D.
From an economic point of view, India and China are somewhat similar: Both are huge, low-wage countries, probably with similar patterns of comparative advantage, which until recently were relatively closed to international trade. China was the first to open up. Now that India is also opening up to world trade, how would you expect this to affect the welfare of China? Of the United States? (Hint: Think of adding a new economy identical to that of China to the world economy.) A. From China's perspective, the world relative supply curve will shift to the left. This shift will improve China's terms of trade. The U.S. purchases of Chinese exports will hurt the U.S. by decreasing the relative price of goods that the U.S. exports. B. From China's perspective, the world relative supply curve will shift to the right. This shift will worsen China's terms of trade. The U.S. purchase of Chinese exports will benefit the U.S. by increasing the relative price of goods that the U.S. exports. C. From China's perspective, the world relative supply curve will shift to the left. This shift will worsen China's terms of trade. The U.S. purchase of Chinese exports will benefit the U.S. by increasing the relative price of goods that the U.S. exports. D.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:From an economic point of view, India and China are somewhat similar: Both are huge, low-wage countries, probably
with similar patterns of comparative advantage, which until recently were relatively closed to international trade. China
was the first to open up.
Now that India is also opening up to world trade, how would you expect this to affect the welfare of China? Of the United
States? (Hint: Think of adding a new economy identical to that of China to the world economy.)
A.
From China's perspective, the world relative supply curve will shift to the left. This shift will improve China's terms of trade.
The U.S. purchases of Chinese exports will hurt the U.S. by decreasing the relative price of goods that the U.S. exports.
B.
From China's perspective, the world relative supply curve will shift to the right. This shift will worsen China's terms of
trade. The U.S. purchase of Chinese exports will benefit the U.S. by increasing the relative price of goods that the U.S.
exports.
C.
From China's perspective, the world relative supply curve will shift to the left. This shift will worsen China's terms of trade.
The U.S. purchase of Chinese exports will benefit the U.S. by increasing the relative price of goods that the U.S. exports.
D.
From China's perspective, the world relative supply curve will shift to the right. This shift will improve China's terms of
trade. The U.S. purchase of Chinese exports will hurt the U.S. by decreasing the relative price of goods that the U.S.
exports.
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