Trade Theory Suggests That Japan Would Gain from a Subsidy

question 44

Multiple Choice

Trade theory suggests that Japan would gain from a subsidy the United States provides its grain farmers if the gains to Japanese consumers of wheat products more than offsets the losses to Japanese wheat farmers. This would occur as long as Japan

• A) is a net importer in bilateral trade flows with the United States.
• B) is a net importer of wheat.
• C) has a comparative advantage in wheat.
• D) has an absolute advantage in producing wheat.
• E) is involved in intra-industry trade with the United States.

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Definitions:

Consumer Spending

The total amount of money spent by households and individuals in an economy on goods and services, an important indicator of economic health.

Consumption Expenditures

The total amount of money spent by households and individuals on goods and services for personal use.

Circular Flow Diagram

A visual model of the economy that shows how dollars flow through markets among households and firms.

Households

Economic units that consist of all individuals who live together in one dwelling, making joint decisions about consumption and labor.