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S-7 Chapter 7 - W J Streeter MEC 292 – FALL 2008 Growth and Trade From Static to Dynamic models Pugel Chapter 7 W J Streeter mec 292 – Fall

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Unformatted text preview: W. J. Streeter MEC 292 – FALL 2008 Growth and Trade From Static to Dynamic models Pugel Chapter 7 W. J. Streeter mec 292 – Fall 2008 From this mornings • Gold May Regain Luster for World's Central Banks • Turmoil, Weak Dollar Raise Metal's Profile; Chinese 'Nibbling'? • "I'd be surprised if the Chinese hadn't been nibbling at the gold market when prices were lower," said Mark O'Byrne, Dublin-based director of Gold & Silver Investments Ltd. • The U.S. is at the top of the list of official holders. It holds 78.2% of its reserves in gold, which is about 8,133.5 tons of gold. • "We could not see a footprint from a central bank," said Jon Nadler, an analyst at Kitco Bullion Dealers in Montreal. The Swiss central bank doesn't appear to have been buying back what it recently sold, he said. W. J. Streeter mec 292 – Fall 2008 Simplifying Assumptions of Factor Endowment Theories • 2 regions (nations), 2 commodities, 2 factors of production • Factors are mobile between sectors • Factors are fully employed overall in the economy • Trade is free of government restrictions, tariffs or other barriers • There are no transportation costs • Technologies available are the same for both countries • International trade between the two nations is balanced W. J. Streeter mec 292 – Fall 2008 Factor endowments • Factor endowments:- A nation’s position in factors of production such as skilled labor or infrastructure necessary to compete in a given industry – Basic factor endowments – Advanced factor endowments W. J. Streeter mec 292 – Fall 2008 Basic factor endowments • Basic factors (Heckscher-Olin) Factors present in a country – Land, Natural resources – Climate – Geographic location – Demographics, Working population – Physical capital (assets that have been produced) • While basic factors can provide an initial advantage they must be supported by advanced factors to maintain success W. J. Streeter mec 292 – Fall 2008 Advanced factor endowments • Advanced factors: Are the result of investment by people, companies, government, and are more likely to lead to competitive advantage • If a country has no basic factors, it must invest in advanced factors W. J. Streeter mec 292 – Fall 2008 Advanced factor endowments • Education • Communications infrastructure • Skilled labor • Research facilities • Technology W. J. Streeter mec 292 – Fall 2008 Infrastructure in Latin America The Economist , June 15, 2006 W. J. Streeter MEC 292 – FALL 2008 Growth and Trade From Static to Dynamic models • Factor endowments change over time • Technology usually improves • Tastes change Pugel Chapter 7 W. J. Streeter mec 292 – Fall 2008 Quiz: Chapter 7 – Growth and Trade 1. One fundamental source of long-run economic growth would be:...
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This note was uploaded on 09/21/2009 for the course B 290 taught by Professor Narg during the Spring '09 term at Washington University in St. Louis.

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S-7 Chapter 7 - W J Streeter MEC 292 – FALL 2008 Growth and Trade From Static to Dynamic models Pugel Chapter 7 W J Streeter mec 292 – Fall

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