question archive Assume there are two countries China and Japan in the world and two goods (food and automobiles)
Assume there are two countries China and Japan in the world and two goods (food and automobiles)
Subject:EconomicsPrice: Bought3
Assume there are two countries China and Japan in the world and two goods (food and automobiles). Assume China is an exporter of food and importer of automobiles. And Japan is an exporter of automobiles and importer of food. Assume currently both countries freely trade with each other. One day China decided to both impose import tariff on Japanese automobiles and also provide export subsidy for its food producers. Explain graphically the effect of these policies on Japanese terms of trade. Would Japanese terms of trade rise, fall, or ambiguously change as a result?
