Give brief and clear answers Econ 365 M. Muniagurria Spring 2006 Exam 2 (Total Points : 100) (I) Latin America: Thorp/Taylor (1) (6 pts) What is the “staple” theory of development? (2) (12 pts) Give a complete and precise explanation of why (according to Taylor) Argentina’s growth performance deteriorated during the interwar years (1913-1930) and during the Import Substitution Industrialization period. You need to provide diagrams. (II) Latin America : ISI (Import Substitution Industrialization), ERP (Effective Rate of Protection), RER (real exchange rate) (1) (6 pts) Briefly explain what is the “infant industry” argument for protection. (2) (6 pts) Briefly explain why during ISI some industries exhibited large negative ERP. (3) (16 pts) Consider the following hypothetical situation. Suppose that in the last five years the inflation rate has been the same in Uruguay and the US. Assume further that the nominal exchange rate between the Uruguayan peso and the dollar has
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