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ECON672 Global Economics
Problem Set 1
1. The table below shows kg. of wheat and meters of cloth that the United States and the United Kingdom can produce with one hour of labor time under four different cases.
1. 1. In each case, identify which commodity that the United States and the United Kingdom have a comparative advantage or disadvantage over each other.
|
|
Case A |
Case A |
Case B |
Case B |
Case C |
Case C |
Case D |
Case D |
|
Country |
US |
UK |
US |
UK |
US |
UK |
US |
UK |
|
Wheat (W) (kg/hour) |
4 |
1 |
4 |
1 |
4 |
1 |
4 |
2 |
|
Cloth (C) (meter/hour) |
1 |
2 |
3 |
2 |
2 |
2 |
2 |
1 |
1.2. Indicate in each case whether or not trade is possible?
1.3. Suppose that in Case B, the United States exchanges 4W for 4C with the United Kingdom.
(a) How much does the United States gain in terms of cloth?
(b) How much does the United Kingdom gain in terms of cloth?
(c) What is the range for mutually beneficial terms of trade?
(d) How much would each nation gain if they exchanged 4W for 6C instead?
2. Study the Tables below and answer the following questions:
Trade orientation and growth in developing countries
|
|
Average growth of GDP per capita |
||
|
1963-73 |
1973-1985 |
1980-1992 |
|
|
Strongly open to trade |
6.9% |
5.9% |
6.4% |
|
Moderately open |
4.9% |
1.6% |
2.3% |
|
Moderately anti- trade |
4.0% |
1.7% |
-0.2% |
|
Strongly anti-trade |
1.6% |
-0.1% |
-0.4% |
Global Inequality trends
2. 1. What is the correlation between GDP growth and openness to international trade? What factors may explain this relationship?
2.2. Based on the data given, has globalization increased or decreased inequality? What factors may explain this?
3. The Table below shows balance of payments data for Sri Lanka ($ million).
3.1 Fill in the cells marked A) and C)
3.2 How could have Sri Lanka financed its overall balance of payments deficit?
|
Balance of Goods Trade |
-1406 |
Capital Account (This is a sub-AC) |
55 |
|
Balance of Services Trade |
272 |
Net direct Investment |
252 |
|
Investment Income |
-251 |
Net Portfolio Flow |
2 |
|
Net Transfers |
1097 |
Net Other |
-162 |
|
Current Account |
A) |
Errors & Omissions |
C) |
|
|
Overall Balance |
-331 |
|