Suppose that trade in asset is not allowed but the two countries ...

[james9437]

Suppose that trade in asset is not allowed but the two countries sign a treaty that guarantee the sending of 25 tons of kiwi in good time by the high output country in that season. What will the outcome of such a treaty? Explain why.
 
  What will be an ideal response?

Question 2

Countries that trade a small amount with a single foreign country tend to float their exchange rate to the foreign country's currency.
 
  Indicate whether the statement is true or false

[smrtceo]

Answer to Question 1

The outcomes will be exactly the same as in Case D above. In other words, rather than signing a treaty, just leaving the financial markets to function will lead us to the desirable results.

Answer to Question 2

TRUE

[james9437]

Excellent

[peter]

Thanks for the timely response, appreciate it