“Recently, the country signs a free-trade agreement (FTA) with its major trading partners. In the newly...

“Recently, the country signs a free-trade agreement (FTA) with its major trading partners. In the newly signed FTA the country agrees to reduce import tariffs on its trading partners’ dairy products. This could deteriorate the country’s current balance.” True/False/Uncertain, explain and support your answer by ONE DD-AA diagram (only the first diagram will be graded).

Note: You can assume the country’s current account is in balanced in the initially equilibrium and the signing of the FTA has a long-last effect on the economy.

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Expert Solution

Rahul Sunny answered 1 year ago

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