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8:43 Assignment_24 ■ LTE University of Eswatini Department of Business Administration International Economics & Trade ACF608 Assignment Instructions: Answer all questions 1. In 1975, wage levels in South Korea were roughly 5% of those in the United States. It is obvious that if the United States had allowed Korean goods to be freely imported into the United States at that time, this would have caused devastation to the standard of living in the United States, because no producer in this country could possibly compete with such low wages. Discuss this assertion in the context of the Ricardian model of comparative advantage. 2. "The world's poorest countries cannot find anything to export. There is no resource that is abundant certainly not capital or land, and in small poor nations not even labor is abundant." Discuss. 3. Explain why it may be argued that the relative importance of the intra-industry component of world trade is likely to lessen economic strife or confrontation (as in having distributional effects) within countries in which overall trade is expanding? 4. Suppose that two events occur simultaneously: (i) A firm in country A exports $1,000 of goods to country B and receives a $1,000 bank deposit in country B in exchange; and (ii) a country A immigrant gives $500 to a relative in country B in the form of a $500 buildup of the relative's bank account in country A. Discuss the impact of these two events on country A's ( a )merchandise trade balance, (b) current account balance, and( c ) official reserve transactions balance? 5. Suppose that you observe the following exchange rates: $2/£; $0.0075/\; and £0.005/\. Is 6. there cross-rate equality? If yes, why? If not, what would you expect to happen? Do you think that the monetary approach is a satisfactory explanation of a country's exchange rate? Why or why not? 1 Q

8:43 Assignment_24 ■ LTE University of Eswatini Department of Business Administration International Economics & Trade ACF608 Assignment Instructions: Answer all questions 1. In 1975, wage levels in South Korea were roughly 5% of those in the United States. It is obvious that if the United States had allowed Korean goods to be freely imported into the United States at that time, this would have caused devastation to the standard of living in the United States, because no producer in this country could possibly compete with such low wages. Discuss this assertion in the context of the Ricardian model of comparative advantage. 2. "The world's poorest countries cannot find anything to export. There is no resource that is abundant certainly not capital or land, and in small poor nations not even labor is abundant." Discuss. 3. Explain why it may be argued that the relative importance of the intra-industry component of world trade is likely to lessen economic strife or confrontation (as in having distributional effects) within countries in which overall trade is expanding? 4. Suppose that two events occur simultaneously: (i) A firm in country A exports $1,000 of goods to country B and receives a $1,000 bank deposit in country B in exchange; and (ii) a country A immigrant gives $500 to a relative in country B in the form of a $500 buildup of the relative's bank account in country A. Discuss the impact of these two events on country A's ( a )merchandise trade balance, (b) current account balance, and( c ) official reserve transactions balance? 5. Suppose that you observe the following exchange rates: $2/£; $0.0075/\; and £0.005/\. Is 6. there cross-rate equality? If yes, why? If not, what would you expect to happen? Do you think that the monetary approach is a satisfactory explanation of a country's exchange rate? Why or why not? 1 Q

Microeconomics: Principles & Policy
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter21: International Trade And Comparative Advantage
Section: Chapter Questions
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8:43 Assignment_24 ■ LTE University of Eswatini Department of Business Administration International Economics & Trade ACF608 Assignment Instructions: Answer all questions 1. In 1975, wage levels in South Korea were roughly 5% of those in the United States. It is obvious that if the United States had allowed Korean goods to be freely imported into the United States at that time, this would have caused devastation to the standard of living in the United States, because no producer in this country could possibly compete with such low wages. Discuss this assertion in the context of the Ricardian model of comparative advantage. 2. "The world's poorest countries cannot find anything to export. There is no resource that is abundant certainly not capital or land, and in small poor nations not even labor is abundant." Discuss. 3. Explain why it may be argued that the relative importance of the intra-industry component of world trade is likely to lessen economic strife or confrontation (as in having distributional effects) within countries in which overall trade is expanding? 4. Suppose that two events occur simultaneously: (i) A firm in country A exports $1,000 of goods to country B and receives a $1,000 bank deposit in country B in exchange; and (ii) a country A immigrant gives $500 to a relative in country B in the form of a $500 buildup of the relative's bank account in country A. Discuss the impact of these two events on country A's ( a )merchandise trade balance, (b) current account balance, and( c ) official reserve transactions balance? 5. Suppose that you observe the following exchange rates: $2/£; $0.0075/\; and £0.005/\. Is 6. there cross-rate equality? If yes, why? If not, what would you expect to happen? Do you think that the monetary approach is a satisfactory explanation of a country's exchange rate? Why or why not? 1 Q
Transcribed Image Text:8:43 Assignment_24 ■ LTE University of Eswatini Department of Business Administration International Economics & Trade ACF608 Assignment Instructions: Answer all questions 1. In 1975, wage levels in South Korea were roughly 5% of those in the United States. It is obvious that if the United States had allowed Korean goods to be freely imported into the United States at that time, this would have caused devastation to the standard of living in the United States, because no producer in this country could possibly compete with such low wages. Discuss this assertion in the context of the Ricardian model of comparative advantage. 2. "The world's poorest countries cannot find anything to export. There is no resource that is abundant certainly not capital or land, and in small poor nations not even labor is abundant." Discuss. 3. Explain why it may be argued that the relative importance of the intra-industry component of world trade is likely to lessen economic strife or confrontation (as in having distributional effects) within countries in which overall trade is expanding? 4. Suppose that two events occur simultaneously: (i) A firm in country A exports $1,000 of goods to country B and receives a $1,000 bank deposit in country B in exchange; and (ii) a country A immigrant gives $500 to a relative in country B in the form of a $500 buildup of the relative's bank account in country A. Discuss the impact of these two events on country A's ( a )merchandise trade balance, (b) current account balance, and( c ) official reserve transactions balance? 5. Suppose that you observe the following exchange rates: $2/£; $0.0075/\; and £0.005/\. Is 6. there cross-rate equality? If yes, why? If not, what would you expect to happen? Do you think that the monetary approach is a satisfactory explanation of a country's exchange rate? Why or why not? 1 Q
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