Suppose a national government chooses to impose barriers to trade in an effort to promote a more diversified economy. This objective would be particularly important to, for example, an economy largely dependent on one or two agricultural products because
◦ it will allow firms in the economy to exploit economies of scale in newly developed industries.
◦ it will increase net exports for the economy.
◦ any volatility in the world prices of those commodities leads to great volatility in national income.
◦ it will certainly maximize national income and raise average living standards.
◦ that country's terms of trade will continue to deteriorate over time if it continues to specialize.
Ivory trade in East Africa during the 1880s and 1890s
Consider the production function ( ) 0.5 0.5 Y = AK L . Suppose both saving rate (s) and the ...