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AutoSave Off H U EU = Module 1 Assignme... Search Dunn, Sally DS - O X File Home Insert Draw Design Layout References Mailings Review Share Comments E S E ALT v View Developer Help New Tab Acrobat Find AaBbCcDc AaBbCcDc AaBb C AaBbcc Sc Replace 1 Normal 1 No Spac... Heading 1 Heading 2 = A Select Paste Times New Rom v 11 A A Aar A S BI U va x, x? A D A Font 1 ...T...V Aste LE 3 Dictate Sensitivity Create and Share Request Adobe PDF Signatures Adobe Acrobat Clipboard Voice Sensitivity Paragraph ...1... Styles ... 4.. Editing ....... A L ...2... ... ... ... ... I 1. In what ways are the Mercantilists' trade views different from those of Adam Smith's? ' ' T ' 2. Below are the PPS and the TOT for a small open economy. Determine the commodity of its comparative advantage. Explain. The autarky is at point A. Suppose the terms of trade is 1X for 0.25Y. ' ' ' Small Nation ' ' TOT ' ' ' ' ' 500 TOT = 0.25Y ' ' ' ' ' ' 1,800 4,500 X ' ' ' ' ' Suppose the nation decides to devote all of its resources to the production of the commodity of its comparative advantage. Given that the nations decides to consumes the same amount of the commodity of its comparative advantage before and after trade, determine the volume of export and import. Determine the amount of consumption gain from trade. ' ' ' ' ' Page 1 of 4 386 words B D SFocus 單,目 屬 - - - + 100% 1 Type here to search 10:05 1/26/2020 F

Answer 1

Q1. Mercantilists were against the theory of free trade. They argued that the wealth of a nation is proportional to the amount of gold reserves it has. Basically they were of the view that a country must restrict imports, promote exports to increase the stock of gold in the nation. They also were of the opinion to promote domestic sector industries to increase the level of exports.

Adam Smith, on the other hand, was a firm believer in free trade policies. In his publication The wealth of nations in 1776, he gave the concept of absolute advantage. He believed that it was not possible to get all nations rich by mercantilism as for one nation to rich, other nation has to import its products and vice versa which is not possible according to the trade framework for al nations i.e. if one country exports, other have to import that product for trade to take place. He believed that every nation must focus on production fo the commodity in which one has a comparative advantage.In this way, it can utilize its resources to the optimum and all nations can benefit simultaneously from trade.