International Trade Homework
ECON 4431W Fall 2023 HOMEWORK II Upload to CANVAS in PDF BY 11.59 am on 10/06/2023 PLEASE TYPE ALL ANSWERS, DRAW CLEAR and BIG DIAGRAMS. *************************************************************************************** 1. (10 points) Use Offer Curves (OC) to explain. Read the textbook chapter 5 and 6 as well. Find one January 2024 news article (Internet, newspapers, magazines) that deals with any government policy which will shift the offer curve of a country (that is, change the country’s willingness to trade). Make sure you pick an article that meets this criteria. If you are not sure of your article, please consult me. 1. What do you think will be the ultimate effects on the country making the change? ( volume of trade, terms of trade, other effects ) Give at least three effects. Label them 1, 2, 3. 1. Draw a diagram to show the shift in the Offer Curve and any other effects. Please attach the article, so I know what you are explaining. ************************************************************************************ 2. (15 points) TRUE/FALSE; EXPLAIN: Mention if the following statements are True or False, AND Explain clearly WHY YOU CHOOSE THE ANSWER, using concepts and trade theories explained in class. You answer should be about 3-5 sentences, with diagrams if needed. Please base your answers on the trade theories discussed in class. 1. Under free trade, one country always gains and the other always loses. 2. The theory of Absolute Advantage states that free trade benefits all countries. 3. The Theory of Comparative Advantage states that trade arises due to different amounts of labor and capital in the countries. 4. The Neoclassical theory states that trade arises due to different amounts of labor and capital in the countries. 5. When moving from autarky (no trade) to free trade, prices rise in all countries. 6. A country should reduce its imports and increase its exports if it wants to get rich. 7. Mercantilists recommended strong government regulation of trade. 8. Adam Smith recommended strong government regulation of trade. 9. The Theory of Absolute Advantage clearly explains producer and consumer equilibriums under Autarky and Free trade. 10. The offer curve of a country shifts outwards when incomes rise. *********************************************************** 3. (10 points) Define: (Your answers should be one or two sentences, with diagrams, if needed) 1. Specialization 2. Terms of Trade 3. Offer Curve 4. Relative Wage Ratio 5. Export Condition 6. Comparative Advantage 7. Small country 8. Input-Output ratio 9. Production gains from trade 10. Consumption gains from trade ********************************************************************************* Question 4 (15 points) Draw diagrams for parts A and B. A)Explain the Ricardian Comparative Advantage Theory of Trade. 1. Describe the Autarky and Free Trade situations think about which factor influences trade decisions; give diagrams or tables like we had in class and explain what happens when the country moves from Autarky to Free Trade. 2. Give details on the gains from trade. What causes a country to be more competitive than other countries?. B)Explain the Neo-Classical Theory of Trade. 3. Describe the Autarky and Free Trade situations; give diagrams and explain what happens when the country moves from Autarky to Free Trade. 4. Give details on the gains from trade. Label and mention the Trade triangles.
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