Questions and Answers of International Economics 5th

Numerically compare and contrast absolute and comparative advantage.
Explain how a nation can gain from trade even though as a result not everyone is better off. Is this a contradiction?
Explain how a country with no absolute advantage can still gain from trade.
International trade can cause some individuals and communities to prosper and others to suffer a decline in their fortunes. Explain the pros and cons of the different options for addressing the issue
Contrast the concepts of comparative advantage and competitiveness.
Developing countries are considered to be the main providers of cheaper and better imports. In this regard, how is the international trade viewed in developing countries?
Discuss the economic and ethical considerations of economic restructuring caused by international trade.
According to the following table, which country is relatively labor-abundant?Explain your answer. Which country is relatively capital-abundant? Capital Labor Japan 10 machines 20 workers Indonesia 30
Use the Heckscher-Ohlin Trade Model to analyze trade patterns between two countries with two inputs and two outputs.
Predict the impacts on different factors of production of trade-opening.
Discuss the limits of the HO model.
Given the information in Review Questions 4.1 and 4.2, explain what happens to the gains and relative prices of goods after trade begins.Questions 4.2Suppose that Japan and Indonesia have the factor
List and describe determinants of trade patterns that are not a result of factor endowments.
Describe the controversies surrounding the impact of international trade on wages and jobs.
Suppose that we have three factors: capital, labor, and land.a. Can these factors easily migrate from one sector to another in the short run or in the long run? Briefly explain.b. Which of these
Give examples of the determinants of international migration and its impact on comparative advantage.
The product cycle model of trade also explains the pattern of international trade. Briefly explain what happens to international trade in each of the phases of the product cycle.
Nestlé is the biggest food producer in the world, with capacities for plant-based food production in Asian countries like China and Malaysia.How might John Dunning’s OLI theory explain the
What is a trade deficit? State some of the disadvantages for a developing country.
Give examples of interindustry and intraindustry trade.
Compare and contrast internal and external economies of scale.
A monopolistic competition, like the one shaping the United States’ semiconductor industry, is often led by internal economies of scale. How does this relatively common market structure benefit
Analyze the effects of international trade in a monopolistically competitive market.
Describe the gains from intraindustry trade.
Explain how transportation costs and internal economies of scale help determine firm location decisions.
Why is geographical concentration said to be self-reinforcing? Can you give an example?
Present the pros and cons of industrial policies.
According to the introduction to this chapter, “trade models built exclusively on the idea of comparative advantage have a mixed record when it comes to predicting a country’s trade pattern.”
The year 2015 was an historic one for U.S. apple growers. China agreed to accept all varieties of America's apples, while U.S. officials moved toward accepting China's apples in return. However, the
When you consider internal combustion engines, you probably think about the one under the hood of your car or truck, the gasoline-powered engine. Although this engine is good for moving you around,
The next time that you are at an electronics store, pick up an iPhone. Open the box and you will find that the device was designed by Apple Inc. in California. Next look at the back of the iPhone and
For more than two centuries, many economists have advocated free trade among nations as the best trade policy. Adam Smith and David Ricardo were pioneers of the argument for free trade. They
Babe Ruth was the first great home run hitter in baseball history. His batting talent and vivacious personality attracted huge crowds wherever he played. He made baseball more exciting by
Economists at the Federal Reserve Bank of Dallas have examined the effects of changing competitiveness and deindustrialization on the labor market. They conclude that the decline of industrial
Natural gas provides an example of comparative advantage, as discussed below. Natural gas is nothing new. Its origins date back to about 1000 b.c. when a goat herdsman in Greece came across a flame
Table 2.10 gives hypothetical export price indexes and import price indexes (2000 = 100) for Japan, Canada, and Ireland. Compute the commodity terms of trade for each country for the period
What is meant by the term trade triangle?
The history of the U.S. automobile industry can be divided into distinct eras: the emergence of Ford Motor Company as a dominant producer in the early 1900s; the shift of dominance to General Motors
The possibility that the United States could lose from free trade is at the heart of some recent critiques of globalization. One critique contends that the world has tended to become "flat" as
For more than a century, labor unions have attempted to improve wages, benefits, and working conditions for their members. In the United States, unions represented about one-third of all workers in
In general, what can be concluded about the impact of transportation costs on the price of the traded product in each trading nation? The extent of specialization? The volume of trade?
What would be the effects if the United States unilaterally removed tariffs and other restraints on imported products? On the positive side, tariff elimination lowers the price of the affected
Global economic downturns can be catalysts for trade protectionism. As economies shrink, nations have incentive to protect their struggling producers by establishing barriers against imported goods.
Describe a specific tariff, an ad valorem tariff, and a compound tariff. What are the advantages and disadvantages of each?
The debt of the U.S. government is of much concern to policymakers and citizens alike. Solutions range from raising income taxes to cutting spending on national defense and entitlements. In an old
Free trade advocate Frederic Bastiat presented the French Chamber of Deputies with a devastating satire of protectionists' arguments in 1845. His petition asked that a law be passed requiring people
Distinguish between consumer surplus and producer surplus. How do these concepts relate to a country’s economic welfare?
What factors influence the size of the revenue, protective, consumption, and redistributive effects of a tariff?
Would a tariff imposed on U.S. oil imports promote energy development and conservation for the United States?
How does the revenue effect of an import quota differ from that of a tariff? TABLE 5.5 Venezuela Supply of and Demand for Television Sets Quantity Demanded Price per TV
The North American Free Trade Agreement (NAFTA) of 1995 was designed to abolish most of the trade barriers among the United States, Canada, and Mexico within a 15-year time period. In 2008, the last
As the U.S. government moved toward enacting its $787 billion fiscal stimulus legislation during the recession of 2007-2009, debate emerged over whether government-funded projects should use only
Global economic downturns are often a catalyst for trade protectionism. As economies shrink, nations have incentives to protect their struggling industries by establishing barriers against imported
Many scientists consider carbon dioxide to be a contributor to global warming. This colorless, odorless gas is released into the environment whenever oil, coal, and other fossil fuels are burned.
After decades of falling domestic oil production, by 2014-2015 output was surging in the United States. The reason? Technological changes in producing crude oil and natural gas from shale (hydraulic
One of the requirements for economic development in a low-income economy is an increase in the nation's stock of capital. A developing nation may increase the amount of capital in the domestic
The ability of OPEC to withstand declining oil prices was tested in 2014-2016. Oil prices dramatically fell during that period, resulting in a near free fall in gasoline prices in the United States,
From the 1980s to 2008, the discussion of the pros and cons of state-directed capitalism versus free market capitalism appeared to be resolved. The robust performance of the U.S. economy, underlaid
A main goal of the European Monetary Union is to promote economic and political unification throughout Europe. Two world wars fought in Europe, plus the Depression of the 1930s that was fueled by
For decades, the southern states of the United States have maintained economic appeal for foreign auto manufacturers.Firms such as Toyota, Honda, Nissan, BMW, and Volkswagen AG have chosen to locate
On his first day in office in January 2017, President Donald Trump signed an executive order removing the United States from the proposed Trans-Pacific Partnership (TPP). This marked the first time
The United States and China are the world's two largest economies, and their trade and investment linkages are expanding. Although the two countries have sought to cooperate on many topics regarding
Do U.S. multinational businesses exploit workers in developing countries? According to critics, maximizing profits is the only thing that matters to multinationals: They search the globe for the
When Donald Trump became president, he declared it was time to get America's corporations to bring home some of the $2.5 trillion cash that they had sitting in lower-tax countries. Trump maintained
Does U.S. immigration policy harm domestic workers? Some analysts maintain that the overall benefits from immigration are small, so it is doubtful these benefits play an important role in the
Suppose ABC Inc., a U.S. auto manufacturer, obtains some of its auto components in Mexico and that the costs of these components are denominated in pesos; the costs of the remaining components are
Table 9.7 illustrates the hypothetical demand and supply schedules of labor in the United States. Assume that labor and capital are the only two factors of production. On graph paper, plot these
Although Vladimir Putin has successfully maintained tight control of Russia's political system, he has not been able to control global financial markets. Such was the case in 2014 when the ruble's
Economic crises tend to occur sporadically virtually every decade and in various countries ranging from Sweden to Argentina, from Russia to Korea, and from Japan to the United States. Each crisis is
When monetary policies diverge, it becomes difficult to maintain a pegged exchange rate. Consider the case of the Swiss franc and the euro. In January 2015, Switzerland shocked the foreign exchange
Following six consecutive years of expansion, the U.S. economy peaked in December 2007, beginning a recession that continued throughout 2008 and 2009. This was triggered by breakdowns in key credit
In your principles of macroeconomics course, you learned about "crowding out" in the domestic economy. Crowding out refers to private consumption or investment spending decreasing as a result of
What is meant by the balance-of-payments?
Do high-technology products invented by American companies result in a trade surplus for the United States? Not necessarily. Consider the case of the iPhone. Designed and marketed by Apple Inc. (a
In 2013, Japanese automakers found that their vehicles became more affordable for consumers worldwide. Why? The exchange value of the yen was falling. Consider the case of Toyota Motor Corporation.
For an American investor, betting on foreign securities (stocks or bonds) involves additional risks beyond the risks of investing in U.S. securities. These risks include political uncertainty,
In 2015, bank regulators determined that five banks were guilty of rigging the foreign exchange market. These banks included Barclays PLC, Citigroup Inc., JPMorgan Chase & Co., Royal Bank of Scotland
Although speculators like George Soros can pull huge profits out of the foreign exchange market, sometimes their currency bets backfire. Consider the case of Controladora Commercial Mexicana SAB
Facing an appreciating yen in recent years, Japanese exporters have realized that it makes their goods more costly and less competitive in foreign markets. How can they protect their profits? By
In response to the Great Recession of 2007-2009, central bankers of various nations adopted expansionary monetary policies to revive their sluggish economies. In theory, these policies reduce
What is meant by the Leontief paradox? What are some possible explanations of the paradox? How can human capital contribute to the explanation of the paradox?
Update Table 12.1 for the most recent year for which data are available.Table 12.1 Year U.S. assets abroad Foreign securities Direct investments at: Historical cost Current cost Market value Foreign
Starting with DX and SX and PX = $4.50 with free trade in Figure 9.1, analyze the partial equilibrium effects of a negotiated export quota of 30X.Figure 9.1 Px
Update Table 12.3 for the most recent year for which data are available.Table 12.3 Year U.S. investments abroad Manufacturing Finance" Other Total Foreign investments in
Draw a figure illustrating the effects of a trade-diverting customs union that increases the welfare of a nation joining it.
Update Table 12.6 for the most recent year for which data are available. How has the ranking of the world’s largest MNCs changed since 2017?Table 12.6 Rank Company 1 23 4 5 6 7 8 9 10 11 Fiat
What was the dollar value of U.S. direct investments abroad and U.S. private holdings of long-term foreign securities in 1980 to 2017?
How were U.S. FDI in 2017 distributed among Europe, Canada, Latin America, and elsewhere? How much of U.S. FDI in 2017 went into manufacturing, finance, and other activities? Answer the same
Indicate how the transactions indicated are entered into the U.S. balance of payments:The U.S. government gives $100 worth of food aid to a developing nation.
Indicate how the transactions indicated are entered into the U.S. balance of payments:A U.S. resident receives a dividend of $100 on her foreign stock and deposits it into her bank account abroad.
At maturity (during the same year), the foreign investor of Problem 6 receives $410 for the principal and interest earned and deposits these dollars in his bank account in his own nation.Problem 6A
Suppose that the current account deficit of a nation is $100 billion and the budget deficit is $80 billion and private saving in the nation is $20 billion, what is the private investment?
In 1973, the GDP deflator was 15.6 in the United Kingdom and 34.3 in the United States (with 1995 = 100). In 2001, it was 116.1 in the United Kingdom and 112.1 in the United States. The exchange rate
In what way can the United States be said to have a trade problem with China?
How does the Swan diagram help us determine the policy mix to reach external and internal equilibrium simultaneously? Under what conditions does a single policy instrument help a nation reach both
Indicate the type of fiscal and monetary policies required to reach point F in the figure for Problem 12 for points C2, C4, C8, and C10.Figure 18.10 Monetary policy (interest
What is meant by currency board arrangements? Dollarization? Why would a nation adopt one or the other? How does each operate? What are the benefits and costs of each?
How was the statistical discrepancy of $92 billion arrived at in the U.S. balance of payments in 2017?
With regard to identity 13-2, (a) Rewrite it for a current account surplus and then (b) Solve it for a budget surplus and then (c) For private saving. (M-X) Current account deficit (Net borrowing
Update Table 13.1 for the most recent year.Table 13.1 Exports of goods and services and income receipts (credits) Exports of goods and services Goods Services Primary income receipts Secondary income

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