Saunders, a sole proprietor of the Saunders Ltd., a firm involved in the business of Electronics, approaches another businessman “Strutt”, involved in a similar business, with a proposal that to keep up with the competition every shop in the mall is slashing their prices, so we should also slash our prices, to which Strutt agreed. However, they later noticed that they were suffering losses because of the price slashing method. Therefore, they both approached other Business owners in the mall with the proposal of fixing the prices of the goods in order to stop the price war. (i) Discuss what kind of arrangement is made in the above case? (2 Marks) (ii) How does this agreement affect the interest of consumers? (3 Marks)
Answers
Answer:
1. In an economic crisis, countries often need financing to help them overcome their balance of payments problems. Since its creation in June 1952, the IMF’s Stand-By Arrangement (SBA) has been the workhorse lending instrument for emerging and advanced market countries. The SBA was upgraded in 2009 along with the Fund’s broader toolkit to be more flexible and responsive to member countries’ needs. Conditions were streamlined and simplified, and more funds were made available up front. The reform also enables broader high-access on a precautionary basis.
2. A central tenet of trade theory is that lowering trade barriers increases welfare. Trade agreements between countries lower trade barriers on imported goods and according to theory, they should provide welfare gains to consumers from increases in variety, access to better quality products and lower prices.