Both should play the tariff game

 Free trade will be the optimal policy

Each should levy a mutually agree upon tariff on imports from the other

One should levy optimum tariff while the other should not levy any tariff

Negative

Infinitely large

Zero

Unity

Revaluation

Devaluation

Monetary policy

 Fiscal policy

Remain at the original position

Shift towards the axis measuring its import goods

Shift towards the axis measuring its export goods

Become a straight line

Work at cross purposes from each other and result in perverse adjustment

Work at cross purposes from each other and result in incomplete adjustment

Reinforce each other and result in complete adjustment

Reinforce each other but still result in incomplete adjustment

 A country can always run by levying a tariff even if the other country retaliates

The higher a country’s share of foreign trade, the larger is the scope for its optimum tariff

Developed countries are likely to gain more from exploiting a monopoly position by applying high tariffs

 The less developed countries are not likely to gain much from high tariffs and their optimum tariffs are likely to be quite low

 Have a favourable effect on its balance of trade

 Bring about a decrease in unemployment

 Produce an expansionary effect on national income

All of the above 

An expansionary effect on national income

Reducing imports and increasing demand for home produced goods

Exporting part of its unemployment to its trading partner

All of the above

 The liquidity problem

 The confidence problem

All of the above

IDA

UNCTAD

MIGA

ICSID