Chapter 1 / Class 1

Question 1

Globalization (Deardorff & Stern)

Answer 1

Increase in international transactions in markets for goods, services, factors of production.
Growth of international institutions.

Question 2

Gravity Model Definition

Question 3

Gravity Model Formula

Question 4

Impediments to Trade

Answer 4

Distance, Barriers, Borders

Question 5

Waves of Globalization

Question 6

Service offshoring/outsourcing

Question 7

Trade-GDP Ratio - High vs. Low

Answer 7

High:
- Small domestic market
- Highly open economy
- Trade Agreements
- Specialized Imports

Low:
- Large domestic market
- Protectionist policies: closed economy
- Geographic isolation
- Underdeveloped infrastructure (roads, etc.)

Question 8

The Value of De Minimis Imports (Fajgelbaum & Khandelwal)

Question 9

Consumer Price Index and Trade

Question 10

Gains from Trade
Ricardian Model

Answer 10

Model of Comparative Advantage = Lower Opportunity Cost
- 2 agents, 2 goods

Question 11

Ricardian Model Implications

Answer 11

Product specialization + Differences in wages reflect differences in productivity

Question 12

Info/ Formulas for Ricardian Model

Answer 12

1. Consumer side
   a. Utility maximization U(X, Y) –> MRS
   (derivada parcial en a / der. parcial en
   b) = Relative Prices (Pa / Pb)
   b. Endowments (Ea, Eb)
   c. Budget constraint (PaXa + PbXb =
   PaEa + PbEb)

Question 13

Marginal Rate of Substitution

Answer 13

MRS = (derivada parcial en a / der. parcial en b)

Question 14

Xa (Quantity of good 1) is a function of what?

Answer 14

Of price (price ratio).