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| | Chapter 1 |
 | | The distinction, vital to the classical system of international trade theory, between the short-run mechanism of balance-of-payments adjustment and the static theory of barter was an important dimension of the classical dichotomy between monetary theory and value theory. |
 | | A major task of exposition in classical theory, therefore, was to demonstrate the automaticity of equilibrium through examination of the monetary adjustment process, and through this demonstration, the unimportance, in the long run, of monetary phenomena. |
 | | The classical school was interested in establishing the direction in which the terms of trade would move as a result of exogenous disturbances to equilibrium such as would arise from tariffs, hoarding, harvest failures, income transfers (or other remittances) and productivity changes. |
| www.columbia.edu /~ram15/ie/ie-01.html (3871 words) |
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