Question

The equilibrium real exchange rate is the rate at which?

a) Domestic and foreign prices are equal.
b) Exchange rate remains constant.
c) There is no trade deficit.
d) International reserves are at their peak.

Answer 1

In a world without trade, the equilibrium price and quantity in each country would be determined solely by the domestic supply and demand. You can tell the equilibrium price and quantity by analyzing the supply and demand curves for each country's market.

Step-by-step explanation:

In a world without trade, the equilibrium price and quantity in each country would be determined solely by the domestic supply and demand. The equilibrium price is the price at which the quantity demanded equals the quantity supplied, and the equilibrium quantity is the quantity traded at that price.

For example, if there is only domestic supply and demand for a certain product in a country, the equilibrium price would be where the quantity demanded equals the quantity supplied. In this case, there would be no trade between countries, and each country would have its own equilibrium price and quantity.

You can tell the equilibrium price and quantity in each country in a world without trade by analyzing the supply and demand curves for each country's market. The equilibrium point is where the curves intersect, representing the price and quantity at which the market clears.