International Economics Final

refer to the figure above, a tariff of _____ would be prohibitive

$15

refer to the figure above, With the tariff, the government collects

$150,000

the US charges

(both B and C) lower tariff rate on goods from countries and low or zero tariffs on good from certain developing countries

Refering to the figure- The relative price of S (in terms of T) is

1/2

If the relative price of S in terms of T is 2 and S has nominal price of $1, then the nominal price of T is

50 cents

Given the input output relationships in the table below: goods A B X 8 4 Y 4 1 Which country has absolute advantage in which good and why? which country has comparative advantage in which good and why? If A endowed with 8000 hours of labor, how much X will it produce after trade? How much Y? What is allowable range on A's wages relative to B if trade is flowing between these two countries?

A. B has absolute advantage in both goods because it requires fewer resources to produce the same amount of goods. B. Coutry B has comparative advantage in good Y because it can produce Y with lower opportunity cost C. Country A will specialize in producing good . 8000/8=1000 units of x and therefor none of y. Country B will specialize in good y. 8000/1=8000 units of x and therefor none of x. D. For A to export good x- E8Wa<4Wb for B to export good y - 1Wb<E4Wa therefore, when combining the two - 2<Wb/E*Wa4

According to the human skills theory

All of the above

An input-output table

All of the above

According to the classical theory of international trade

All of the above are false or

Suppose that there are two factors, capital and land, and that the United States is relatively capital abundant while Canada is relatively land abundant. According to the HO model,

All of the above.

Leontief reconciled his results by arguing

American labor is more efficient than foreign

A situation in which a country does not take part in international trade is known as____?

Autarky

Refer to the figure above- This countrys exports equal

CD units of X

Using demand and supply diagram, illustrate the effects of a tariff on imports, In particular on domestic production, consumption, imports, prices, etc

Consumers of the product in the importing country R worse-off as a result of the tariff. The increase in the domestic price of both imported goods& the domestic substitutes reduces consumer surplus in the market.Producers in the importing country R better-off as a result of the tariff. The increase in the price of their product increases producer surplus in the industry. The price increases also induces an increase in output of existing firms, an increase in employment,& an increase in profit &/or payments to fixed costs. The government receives tariff revenue as a result of the tariff. Who will benefit from the revenue depends on how government spends it.Because there R only negative elements in the national welfare change, the net national welfare effect of a tariff must be negative. This means that a tariff implemented by a "small" importing country must reduce national welfare.

Referring to the figure- In autarky, the economy would be in general equilibrium at point

D

Define the official settlements balance. Is there any difference between the United States and other countries in terms of what this balance measures? How does this affect the ability of the countries to run current account deficits?

For most countries it measures international reserve changes. For the United States, it records changes in short-term U.S. liabilities held by foreign monetary agencies. This demand for dollar denominated short-term debt by foreign central banks permits the United States to finance current account deficits largely with dollars. Other countries must finance such deficits by selling foreign currency and, as a result, face a greater constraint on their ability to run deficits as they eventually run out of international reserves. Such a constraint does not exist for the United States.

The difference between a countrys GNP and its GDP is that

GDP refers to production within the nation while GNP refers to production by domestic factors no matter where they are located.

Can a country hve comparative advantage in all products?

No, a country cannot have comparative advantage in all products. In regards to comparative advantage, a country can only have comparative advantage over one product, not all. Comparative advantage is a condition of a producer where it is better suited for the production of one good over another good.For example, if good A can be produced more efficiently than Good B, this comparison is done in terms of opportunity cost of each good, not in terms of pure production costs.

Describe the controversy surrounding the HO model and the widening of the american income gap. Use the Rybczynski theory, factor price equalization, and stopler-samuelson theories in your answer.

Over past 3 decades, real wages in America paid 2 blue collar workers have only risen slightly whereas real wages paid 2college graduates have risen significantly. Many pundits claim that this income gap has been widening cuz of international trade, particularly as the U.S. has increased trade w/ developing countries such as China. The HO model predicts that low-skilled wages should fall towards wage rates paid in developing countries. Some economists have suggested that it is the rapid pace of technological change that has reduced the demand for low-skilled workers, leading to the reduced wages& employment levels in his sector. According to the Rybczynski theory, when prices are constant, if a country experiences a gain in its capital stock, it will produce more of the capital intensive goods &less of the labor intensive goods. However, the stopler-samuelson theory predicts that the trade benefits the abundant factors of a country&harms the scarce factors. When discussing the factor price equalization theory, if a country is labor abundant, then once trade opens, wages should rise and rent should fall in that country. When viewing the 2 factors, capital & labor, trade between the 2 countries, a number of things are expected to happen in regards to the HO model. Say country A is capital abundant& country b is labor abundant. Country A should support country B. Country B's landowners should support free trade between the countries. U.S is considered to be capital abundant &receive labor abundant products from foreign countries because foreign countries are more productive in terms of labor than US is.

______ analysis by economists refers to the attempt to answer questions such as what are the effects of a tax on production and consumption decisions

Positive

Which of the following statements about international trade is true

Potentially, a country can have absolute advantage in all goods

In finding that us exportd tend to come from labor intensive industries, while us imports are produced using relatively capital intensive techniques is known as

The Leontief Paradox

which of the following theorems predicts that trade benefits the abundant factors of a country and harms the scarce factors?

The Stopler-Samuelson theorem

Refer to the figure above. This country has comparative advantage

X

Refering to the figure- This country has comparative advantage in good____

Z

Ad valorem tariffs are collected as

a percentage of the price of the product

absolute advantage is determined by

actual differences in labor productivity between countries

The classical theory predicts that____?

all of the above

Most Tariffs have

both protective revenue and revenue effects

In the classical model, the direction of trade is determined by

comparative advantage

The difference between what consumers have to pay for a particular and what they are willing to pay is known as

consumer surplus

if a country has bowed out (concave to the origin) production possibility frontier, then production is said to be subject to____?

decreasing opportunity cost

According the HO model, the source of comparative advantage is a country's

factor endowments

The gains from international trade are closely related to

how much the autarky price differs from the international price

If individuals have money illusion then they

ignore the effects on their income or wealth of some price changes in the economy

An indifference curve

is a locus of bundles of goods such that the consumer is indifferent between each of the bundles

According to the product life cycle model, comparative advantage

may move from one country to another as a product matures.

According to the Rybczynski theorem, at constant world prices, if a country experiences a gain in its capital stock it will produce

more of the capital intensive good and less of the labor intensive good

In autarky, when a community maximizes its standard of living, its consumption point is

on the production possibility frontier

the us imposes tariffs

only on imports

comparative advantage is determined by

relative differences in labor productivity between countries

The labor theory of value

says that the price of a good is determined by the amount of labor required to produce it

According to the factor price equalization theorem, the ___________ factor should oppose free trade policies in any given country

scarce

According to the factor price equalization theorem, if A is labor abundant, then once trade opens

wages should rise and rents should fall in A

Mercantilism____

was a system of export promotion and barriers to imports practices by governments, especially in the 17th and 18th centuries.