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When two countries trade each one can specialize and the

1. "When two countries trade each one can specialize and the combined output will be higher which expands consumption possibilities of both the countries". Do you agree? Explain your answer.

2. a. What is Terms of Trade? How is it computed? Explain with an example.

b. What is Comparative Advantage? Explain with an example of a two-country and two-commodity model.

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