Tot (1 Viewer)

[symo]

would you say that the recent appreciation of the $A is causing a rise in the terms of trade caus Xs are increasing in price n Ms are decreasing in price..or does the exchange rate not influence the tot. not sure... the text book didnt mention echange rates?

 

[AGB]

in theory it most definitely does....however in reality, the effect is not as pronounced, as firms will alter their prices in order to remain price competitive

 

[Left-ism]

yes u would say that.

 

[symo]

Originally posted by AGB
in theory it most definitely does....however in reality, the effect is not as pronounced, as firms will alter their prices in order to remain price competitive

yeah i get what u mean, thats wat i was thinking, in theory it will cause a improved TOT, but it really wouldnt caus our Xs arent as ineslastic as our imports, thus producers would decrease prices otherwise they would lose big time.