Given the Information in Question #12 Above, Suppose That Germany

question 6

Multiple Choice

Given the information in Question #12 above, suppose that Germany is a much larger Country in terms of production and income than is the United Kingdom. In this situation, Other things equal, when the countries engage in trade, the posttrade price ratio (terms of Trade) would tend to settle __________, and __________ would therefore tend to have Relatively large gains from trade.

• A) toward a value of 1 cloth:2 steel; the United Kingdom
• B) toward a value of 1 cloth:2 steel; Germany
• C) toward a value of 1 cloth:1.5 steel; the United Kingdom
• D) toward a value of 1 cloth:1.5 steel; Germany

---

Definitions:

Reversing Trade

The process of undoing or closing out a trading position, often used to correct an incorrect trade or take profits.

Long

A term used in investing to denote the purchase of a security with the expectation that the asset will rise in value.

Futures Contract

A legally binding agreement standardized across the industry to purchase or sell a particular item at a set price at a future date, typically utilized for trading commodities or financial assets.

Margin

The difference between the selling price of a product or service and its cost of production, or the amount of equity an investor has to deposit to borrow money for investing.