B1-3

Question 1

Does mutually beneficial trade have to be based on comparative advantage

Answer 1

No

Question 2

How can a country import more than it exports

Answer 2

Because other countries investments

Question 3

What ate the seven themes in international economics

Answer 3

The gains from trade, the pattern of trade, protectionism, the balance of payments, exchange rate determination, international policy coordination and the international capital market

Question 4

Can international trade have strong effects on the distribution of income

Answer 4

Yea, if international investors gain or domestic industries colapse it can lead to inequality

Question 5

Give an example of protecttionism that would work on the digital sector

Answer 5

In the EU if there is an european alternative gor a free digital service it has to be the default.

Question 6

Are conflicts of interest between or within nations the most determinant for trade policy

Answer 6

Mostly within in the case of democracy

Question 7

Who enforces trade rules

Answer 7

The world trade organization

Question 8

What are the subfields of international economics

Answer 8

The studies of International trade and money

Question 9

Is there a strong correlation between the size of an economies GDP and their market capitalization of trade with other partners

Answer 9

Yes, at least this is the case of US trade with EU countries

Question 10

What is the gravity model of trade

Answer 10

That the value of trades depends on distance and economy size according to the mode Tij = A * Yi * Yj / Dij where Tij is the value of their trade, A is a constant, Y is GDP and D is the distance between the economies

Question 11

Are the constants of the gravity model of trad often exponentiated

Answer 11

Yes to make the model fit the data better, the model thus becomes
Tij = A * Yia * Yjb /Dij**c

Question 12

What may cause reality to diverge from the gravity model

Answer 12

f.ex cultural affinity, legal shenanigans and advantageous geography

Question 13

Do borders only have a negative effect on trade if there is no free trade

Answer 13

No, trade within a nation is typically much stronger than trade with other countries even of there are strong free trade agreements, even with nafta the US canadian border represents a barrier equal to about 2000 miles

Question 14

Is it technology or globalism that is the main driver of globalization

Answer 14

Mostly politics, there was a great wave of globalization between 1840 and 1914 but with the world wars and the following protectionism trade did not reach its 1914’s highs untill 1970 despite rapid technological development

Question 15

Most of what is traded is fuels and mining products

Answer 15

False, more than 50% is manufactured goods like machines and clothing, services are almost a quarter where after raw materials are about 12% and agricultural products about 8%

Question 16

Describe two trends in global trade

Answer 16

Third world countries trade more and more in manufactured goods while first woorld countries like the US trade more and more in services.

Question 17

Explain comparative advantage

Answer 17

Some countries have advantages in producing certain good, f.ex the warm even weather in colombia makes growing flowers possible year round while the technical knowhow and ing´frastructure in the US makes it more efficient at producing computers. Both countries could make both ware but it would take comparatively many resources so they could en up with more if they stick to what they are good at and trade their surplus.

Question 18

What is the unit labor requirement

Answer 18

The hours of labor required to produce one unit of a good in a particular country. This is the inverse of productivity

Question 19

How can the limit of production by labor be described mathematically

Answer 19

L >= aLgQ, the amount of labor must be greater or equal to the quantity of a resource (Q) produced under the unit labor requirement (aL) of the good g

Question 20

Explain a Production possibility fronteir

Answer 20

A line in a graphy where the axles represents two goods and the line is the possible tradeof between the goods. Sortof like a budget line in an indiference curve.

Question 21

The line in a production possibility fronteir graph represents equal opertunity cost between production of the goods in a closed economy.

Answer 21

True

Question 22

What is an absolute advantage in producing a good

Answer 22

When a country can produce a unit of a good with less labor

Question 23

Is comparative advantage the same as absolute advantage

Answer 23

no

Question 24

What determines the price in a closed economy without trade

Answer 24

The relative factor of production of the two goods. If it takes twice the labor to produce a pound of cheese than a pound of wine cheese should be twice as expensive all else equal

Question 25

Why does the relative supply curve look like stair step in the relative supply and demand curve of two wares in general equalibrium analyisis of two trading economies

Answer 25

Becouse the supply starts at the cost of producing the good in the economy that can produce it the cheapest but when demand increases it will reach a point when it is profitable for the other economy to also produce

Question 26

How does comparative advantage differ from absolute advantage

Answer 26

comparative advantage takes opportunity cost into consideration, if a country can produce much more wine than cheese it makes sense for it to produce more of it and sell it to another cointry that is much better at chease even if the country is still a littel better at producing wine too

Question 27

A country has a comparative advantage when it can produce something with fewer factors of production than other nations

Answer 27

No that is an absolure advantage

Question 28

Explain the gains from trade

Answer 28

Trade allows for more efficient indirect production becouse a country good at producing cheese could produce more wine by producing more cheese and trading if for wine from a country good at producing wine than if it just produced wine itself

Question 29

Does lower wages lead to comparative advantage

Answer 29

It may but if another country is productive enough to ofset the extra cost of labor low wages may not be enough

Question 30

What is autarky

Answer 30

A non trade regime

Question 31

Is free trade only beneficial if the country can stand up to forign competition

Answer 31

No becouse an absolute advantage is not the same as acomparative advantage, if wages are lowered a comparative advantage can be reached in one sector but then the doestic workers can still get all the other products produced by the other country for cheaper in comparision than if they were produced at home.

Question 32

Does comparative advantage hurt countries when it is based on low wages (pauper labor argument)

Answer 32

No, not in agregate terms, if they can get more by producing just cheese it will give them more in total and it will give the low wage forign competitors more cheese than if they were to produce it themselves.

Question 33

Does trade hurt a contry if low wages is its only way to get comparative advantage.

Answer 33

No, what is the alternative, to love in squalar with no cheese

Question 34

Why does wages depreciate when a country cannot compete otherwise

Answer 34

Becouse the demand for labor decreases as industries are offshored

Question 35

Why does countries not specialize to the extreme in the real world

Answer 35

becouse there are more than one factor of production which can make advantages fluctuate, becouse contries sometimes protect some industries and becouse it is costly to transport goods and services

Question 36

What are the shortcomings of the ricardinan model of trade

Answer 36

It does not account for some goods being nontraded duet to high transportation costs, it looks at it from the point of view of countries and not people whos income distribution may be worsened by trade, and it also fails to accounts for differing resources and economies of scale as factors of production

Question 37

If a country has an absolute advantage on all goods what goods will it still import according to the ricardian model

Answer 37

The goods where it sproductivity advantange is the smallest aka where it has a comparative advantage.