hw ch. 6 1-14 - Econ 203 TA Ergin Bayrak Chapter 6...

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Econ 203 TA: Ergin Bayrak October 13, 2005 Chapter 6 Homework #1-14 1. The four major economic flows that link the United States with other nations are goods and services , capital and labor flows , information and technology flows , and financial flows . Under goods and services flows , the US exports and imports goods and services, for example the US imports foreign cars; under capital and labor flows , the US establishes production facilities in foreign countries and labor moves between nations, for example many foreigners immigrate between nations; under information and technology flows , the US transmits information to other nations about US products, prices, interest rates, and investment opportunities and receives such information from abroad, for example other countries use technology developed in US; and under financial flows , money is transferred between the US and other nations, for example providing foreign aid. 2. Although the total volume of trade is huge in the US, it constitutes a small percentage of GDP than it does in a number of other nations. The US trades more with industrial countries, but the line is thinning. For instance, we import 51% of our products from industrial countries and import 49% from developing nations. Quantitatively, Canada is the US’s largest trading partner. 3. Factors for the rapid growth of world trade since WWII include improvements in transportation technology and communications technology, and the general decline in tariffs. The United States, Japan, and Germany are the major players in international trade by total volume. Other western European nations, such as Britain, France and Italy are also major exporters and importers. China is a new participant, increasing its reliance on the market system, emerging as a world trader. 4. a. KOREA: Korea would have to sacrifice 6 radios in order to produce 6 chemicals; 1R:1C US: The US would sacrifice 2 radios to produce 4 chemicals; 1R:2C. Korea has comparative advantage over the US in chemicals because they must only forgo 1 radio to gain 1 chemical. The US should specialize but Korea has no
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