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How, then, is it possible that the United States received more foreign asset income than it paid out?
What would be the drain on U.S. GDP (as a percentage) from paying interest on the net foreign debt? Do you think this is a large number?
Why might a government be concerned about its official settlements balance (that is, its balance of payments)?
What was the balance of payments of Pecunia in that year? What happened to the country's net foreign assets?
How would these transactions show up in the balance of payments accounts of New York and New Jersey? What if the New Yorker pays cash for the machine?
Why should the measure of imports used in the GNP accounts therefore be defined to include only imports of final goods and services from abroad?
Compare this situation to the argument over carbon tariffs. Why might defenders argue that such tariffs are legal? What objections can you think of?
Imagine that the central bank of an economy with unemployment doubles its money supply. What the interest rate is initially below its long-run level?
Calculate the 1984-1985 rates of money supply growth and inflation for the United States and Brazil, respectively.
Continuing with the preceding question, note that the monetary value of output in 1985 was billion. Why do you think velocity was so much higher in Brazil?
In what sense could some features of such a policy be defended as a kind of strategic trade policy?
What is main critique against WTO with respect to environmental protection? How does WTO justify position on trade disputes that involve environmental issues?
Suppose that the European Commission asked you to develop a brief on behalf of subsidizing European soft-ware. What are the weaknesses in those arguments?
What are the key assumptions that allow strategic trade policy to work in the Brander Spencer example of Airbus and Boeing?
What are the disadvantages of engaging in strategic trade policy even in cases in which it can be shown to yield an increase in a country's welfare?
What were some of the reasons for the decline in the import-substituting industrialization strategy in favor of a strategy that promotes open trade?
In each of your examples, show how innovation and learning-by-doing are important to the dynamic increasing returns in the industry.
Explain this tendency of industrial clusters to break up in terms of the theory of external economies.
Find the number of firms, the output per firm, and the price per automobile in the new integrated market after trade.
What is the equilibrium price of automobiles in the United States and Europe if the automobile industry is closed to foreign trade?
How would the number of firms competing in a particular market affect the likelihood that an exporter to that market would be accused of dumping?
What would those choices imply for the extent of intra-firm trade across industries? That is, in what industries would a greater proportion of trade occur?
Derive and graph Home's import demand schedule. What would the price of wheat be in the absence of trade?
Derive and graph Foreign's export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.
Determine the effect of the tariff on the welfare of each of the following groups: (1) Home import-competing producers; (2) Home consumers.