Suppose that a small country experiences growth strongly biased ...

[neverstopbelieb]

Suppose that a small country experiences growth strongly biased toward its export, cloth
 
  A) this will have no effect on terms of trade for the country's trading partner.
  B) this will tend to worsen the country's terms of trade.
  C) this will tend to improve the country's terms of trade.
  D) this will tend to worsen terms of trade for the country's trading partner.
  E) this will tend to improve terms of trade for the country's trading partner.

Question 2

If governments promise to bail out the financial system in the event of a crisis, this creates a moral hazard problem. Describe this problem.
 
  What will be an ideal response?

[Sammyo]

Answer to Question 1

A

Answer to Question 2

If the costs of failure are removed, the incentive for decision makers inside financial institutions to make responsible decisions and to take normal precautions are also removed. Governments can't afford to let their financial systems go under but can't let their financial sectors expect bailouts.