Which of the following would cause the current account to ...

[K@]

Which of the following would cause the current account to decrease?
 
  A) an increase in the nominal exchange rate, E
  B) an appreciation of the home currency
  C) an increase in disposable income
  D) an increase in foreign prices, P
  E) a decrease in domestic prices, P

Question 2

Write an essay on the gains from free international trade.
 
  What will be an ideal response?

[Sassygurl126]

Answer to Question 1

C

Answer to Question 2

Static gains from trade-trade leads to a new set of relative prices which, in turn, imply new consumption levels and a redistribution of resources in favor of comparative advantage industries. The combination of effects leads, in a static environment, to an improved standard of living. Dynamic gains from trade-trade can lead to an outward expansion of a country's production possibility frontier.