:1. Compute the terms of trade in each year for this country and fill in the table. b. In which years do the terms of trade improve? c. In which years do the terms of trade deteriorate? d. Explain why a terms of trade \"improvement\" is good for the country. 3. For each of the following events, explain the likely effect on Canada's terms of trade. Your existing knowledge of Canada's imports and exports should be adequate to answer this question. )iscussion Questions 1. Adam Smith saw a close connection between the wealth of a nation and its willingness \"freely to engage\" in for- eign trade. What is the connection? 2. When the North American Free Trade Agreement (NAFTA) was being negotiated in the early 1990s, there was a great deal of debate. One critic argued that \"it can't be in our interest to sign this deal; Mexico gains too much from it.\" What does the theory of the gains from trade have to say about that criticism? 5. One product innovation that appears imminent is the electric car. However, development costs are high and economies of scale and learning by doing are both likely to be operative. As a result, there will be a sub- stantial competitive advantage for those who develop a marketable product early. What implications might this have for government policies toward North Amer- ican automobile manufacturers' activities in this area? Should the Canadian or US. governments encourage joint efforts by Chrysler, Ford, and GM, even if this appears to lessen competition among them? a. A hurricane damages much of Brazil's coffee crop. b. OPEC countries succeed in significantly restricting the world supply of oil. c. Several new large copper mines come into produc- tion in Chile. d. A major recession in Southeast Asia reduces the world demand for pork. e. Russia, a large producer of wheat, experiences a massive drought that reduces its wheat crop by more than 30 percent. . Studies of Canadian trade patterns have shown that industries with high wages are among the largest and fastest-growing export sectors. One example is the computer software industry. Does this finding contra- dict the principle of comparative advantage? . Predict what each of the following events would do to the terms of trade of the importing country and the exporting country, other things being equal. a. A blight destroys a large part of the coffee beans produced in the world. b. The Koreans cut the price of the steel they sell to Canada. c. General inflation of 4 percent occurs around the world. (1. Violation of OPEC output quotas leads to a sharp fall in the price of oil. . Are there always benefits to specialization and trade? When are the benefits greatest? Under what situations are there no benefits from specialization and trade