MidtermTradeReview2

MidtermTradeReview2 - 2nd Midterm Review Questions 1. The...

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2 nd Midterm Review Questions 1. The United States tends to export high-tech manufactures ( H ) such as computers and import low-tech manufactures ( L ) such as clothes and footwear. Assuming that the United States economy is characterized by perfect competition and trade is free. a. Use a diagram to show the United States’ production, consumption, imports and exports. Pay particular attention to the quantities of H and L produced and consumed and the determination of the United States’ terms of trade. b. Using the relative demand/relative supply curves in the world market to analyze the impact on the United States’ terms of trade of the following events: (i) A reduction in the United States’ tariffs on imported clothes and footwear. (ii) South Korea develops the ability to produce high-tech manufactures that can sell in the world market. c. “It is impossible for economic growth in a small country to lower that country's economic welfare, regardless of the bias of the growth.” Explain. 2. The Internet has allowed for increased trade in services such as programming and technical support, a development that has lowered the prices of such services relative to manufactured goods. India in particular has been recently viewed as an “exporter” of technology based services, an area in which the United States had been a major exporter. Viewing manufacturing and services as tradable goods, create a standard trade model for
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MidtermTradeReview2 - 2nd Midterm Review Questions 1. The...

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