Assignment:
Part One
Analyzing the macroeconomic status of a country examines the behaviors within a whole economy. In addition to the macroeconomic factors introduced in the reading materials, other components must be considered when analyzing the economic status of a country. The first component is the misery index, which is the unemployment rate and the inflation rate combined. Another consideration is the economic freedom index, which is an exploration of the overall position of a country in comparison to other countries. Finally, there is the human development index, which focuses on the people within the economy, not just the economic growth within a country.
For this assignment, compare the United States and MEXICO. Throughout this course, multiple resources have been included in all topic materials to provide websites that will assist in the research required for this assignment. Collect the economic data outlined in the "Country Analysis Matrix," and conduct additional research through a minimum of three readings from The Economist. You must provide citations for the three articles from The Economist.
In addition to completing the matrix, write a 250-word summary identifying two major economic strengths and two major weaknesses for your selected country. Focus on identifying factors that contribute to the country's overall performance and support the growth of the economy as a whole. For example, has the country grown primarily through export promotion or domestic growth? Finally, point out any significant differences you observe between your selected country and the United States. Use the matrix you have developed and the readings from The Economist to support your analysis.
Part Two
A minimum of 100 words each question and References (questions 1-6)
1) Take a look at the latest US International Trade In Goods And Services Report. Did the trade deficit increase of decrease for the current period? For the year so far? Which exported services increased in the latest period? Which decreased? What might explain those changes? What exported goods increased? What decreased? How might that be explained?
2) This week we're studying international trade. Economic theory says that free trade makes both countries better off. Is that universally true? Does everyone win under free trade? Check out this discussion on Freakonomics Radio on the globalization of China and how it has affected the US economy (https://freakonomics.com/podcast/china-eat-americas-jobs/).
1. How much did China's exports grow between 1991 and 2013?
2. This article says that when the US trades with developing countries we tend to export skill intensive products and import labor intensive product? How did our trading relationship affect the US DEMAND for skilled labor? How did our trading relationship with China affect the US DEMAND for blue collar labor?
3. The article talks about a possible Border Adjustment Tax that's being talked about by the Trump Administration. What is it and how could it help?
If labor-intensive manufacturing returned to the US would it signal the return of blue collar jobs? According to the article, what's the role of mechanization?
3) "She looks for wool and flax and works with her hands in delight. She is like merchant ships. She brings her food from afar. She rises also while it is still night and gives food to her household and portions to her maidens." Proverbs 31:13-18
In this familiar passage, the bible describes the virtuous woman as a woman who brings her food from afar - presumably importing her food. It does not suggest that she produce her own food or even that she purchase her food locally, though all indications are that she was perfectly capable of doing so. Why might God encourage free trade instead of encouraging each nation to produce everything it needed domestically?
4) The Federal Reserve has signaled that it intends to gradually increase interest rates over the next couple of years. Check out this video from The New York Times. What affect could the interest rate hike potentially have on the value of the US dollar? Why?
5) Every day, the Board of Governors of the Federal Reserve System (The Fed) releases statistics on the value of the U.S. dollar. These statistics compare the value of the U.S. dollar with a variety of foreign currencies -- from the Australian dollar to the Zanzibar Shilling. These statistics are also available for groups of currencies, such as the currencies of the U.S.'s major trading partners. For example, the Trade Weighted Exchange Index: Broad is "a weighted average of the foreign exchange value of the U.S. dollar against the currencies of a broad group of major U.S. trading partners (Federal Reserve, 2017, para. 1)."
The St. Louis Federal Reserve's FRED2 website at shows monthly fluctuations in this exchange rate index over the last 40+ years. The latest 15-year trend shows the value of the dollar hit a peak of 129.5 in February 2002, then followed a downward trend from 2002 to April 2008. From April 2008 to March 2009, the dollar rebounded, then declined again through August 2011. Since then, it has been on an upward trend. For more recent statistics on the exchange rate, you should check the Federal Reserve of St. Louis FRED2 web page. Factors that affect exchange rates include GDP (income), inflation (CPI), and interest rates.
Class -- What economic factors might explain the depreciation of the US$ from 2002 through April 2008? What factors explain it's the upward trend from August 2011 to the present time?
6) "When goods don't cross borders, soldiers will." -- That quote is commonly attributed to Frederic Bastiat, an economist from the 1800's, though there's some disagreement about whether he actually originated the phrase. That's the thinking behind the creation of the European Union after World War II: Countries that do business together, are trading partners, are less likely to make war against each other. On June 23, 2016 the United Kingdom voted to leave the European Union and give up the special trade deals with other EU nations.
Two questions: 1) Do you think Bastiat is right, that countries who are trading partners are less likely to go to war. and 2) How might the United Kingdom's exit from the EU affect its trade with other European nations? How could it affect peace in Europe?