Problem
1. In August 1990, many countries decided to retaliate against Iraq for its invasion of Kuwait by refusing to trade with Iraq (except in food and humanitarian goods). With such an "embargo" in place, what conceptually would happen to Iraq's terms of trade and volume of trade? Illustrate and explain your answer using offer curves.
2. Suppose that an offer curve diagram has developed countries' exports on one axis and developing countries' exports on the other axis. Explain the predicted impact, other things equal, on the terms of trade of developing countries of relatively slow growth in demand for developing countries' goods by developed countries combined with relatively rapid growth in demand by developing countries for developed countries' goods.