Japan primarily exports manufactured goods, while importing raw materials such a

Question

Japan primarily exports manufactured goods, while importing raw materials such as food and oil. Analyze the impact on Japan's terms of trade of the following events:

a. A war in the Middle East disrupts oil supply.

b. Korea develops the ability to produce automobiles that it can sell in Canada and the United States.

c. U.S. engineers develop a fusion reactor that replaces fossil fuel electricity plants.

d. A harvest failure in Russia.

e. A reduction in Japan's tariffs on imported beef and citrus fruit.

Explanation / Answer

1. A war in the Middle East disrupts oil supply. The war in the Middle

East reduces the world relative supply of oil. As a result, the

relative price of oil to manufacturing goes up. This worsens

Japan

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