Multiple Choice
When there is no trade between Econostan and Macroland, the price of orange juice is $1 per cup in Econostan and $0.50 in Macroland, while the price of shoes is $40 per pair in Econostan and $45 per pair in Macroland at current exchange rates. Assuming there is no change in exchange rates, which result could be expected regarding terms of trade if trade opened up between the two countries?
A) The price of orange juice will fall, and the price of shoes will rise in Econostan.
B) The price of shoes will fall, and the price of orange juice will rise in Econostan.
C) The price of orange juice will rise, and the price of shoes will rise in Macroland.
D) The price of both orange juice and shoes will fall in Econostan.
Correct Answer:
Verified
Correct Answer:
Verified
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