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ECN115B Midterm 1 Answer Key

ECN115B Midterm 1 Answer Key - Name Economics 1 15B Winter...

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Unformatted text preview: Name: . Economics 1 15B Winter 201 1 Dr. Janine LF. Wilson Midterm #1 Growth, How Did We Get Here?, and International Trade You will be given one hour and twentyminutes to complete this exam. Credit will be given to correct answers only if there are complete explanations. 1. Economic Development requires that a country reaches rapid rates of growth in income. Various economic models have been used to guide poorer countries in their efforts to achieve economic development. Using Brazil as an example please answer the following questions. a. How IS the advent of food production iinked-with “Gum, Germs and Steel” according to Jared Diamond? (6 points) W( gfidefiey soctehee \OXEWxNQQW coo do were, W100 Qfdmbe 13> iahodoasdq (Woe/S W)" Edd todcdiofl 2% med cigmgixcohon mekee to dioceses and O? Woe: decrees a; Ghee coo «weak mom “AgOUCiWfi/s 13. Brazil 18 a country in South America. Would Jared Di 11d predict that it would have been considered a poor country in the 20‘:h comm-y? Why? Please explain' in detail. (5 points) ‘66 53% hmeflC/Ox Wax $036“ 366% oneriraixon «WC/h (M W (mg as; ems (Odom Rae/gee 3::va ““363 cook cent N06 \Zceiv “65 Oflwfig We ©UVO£\O\ Name: Economics 1 15B Winter 2011 Dr. Janine L.F. Wilson c. If it were 1960 and you were an advocate of the Hatred Domar Model, what would you advise the government of Brazil to do in order to start the process of rapid economic growth? (discuss a Specific element important to the Hal-rod Dome: Model) (5 points) fik a bait QM fiowt’fle‘mefl 5m§>\ \o the. meéréx ere/am ' neffidfié :0 «BREW, Watt (we 8(6)va 5r We <€\o¥\00§1 WWW mghefit (Nix (CXCONEEW \5 $060k) , 00% OD $00000 M) CL??? Of Smtlflge \0 3on my? w \W £13?ch \megrmfifljfi d. If it were 1970 and you instead believed that the Solow Model was better than the Han-0d DomarModel‘ in theory, what would youadvise' the people of Brazil and their government to do in order to achieve modem economic growth? (explain the elements of the Solow Model before you relate it to advice for Brazil) (5 points) ‘Qjecoxee 3&1me are Wen ““th (3* are WWW egvafiffiéo WC \00 (0‘0 3% com cm M%m iéfth \WQE‘M We, 3 ott (00 Endewxorgwxomtmeot (1&3 he}? 360% wk Q? to than” \6083 mm {03%, 0‘; ((B‘CONW Name: 7 Economics 1 1513 Winter 2011 Dr. Janine L.F. Wilson 2. Brazil is currently experiencing devastating flooding. The death toll is expected to reach 1,000. Sachs talked about five ways in which households .“faii to grow” and eight ways in which countries “fail to grow”; What are five total ways that were mentioned in lecture and the reading for a “failure to grow”. Would flooding contribute to these growth failures? (list and discuss using the reasons found in iecttue, discussion or. the readings) (15 points) - \t‘ Hos. a. . Arm CEO Roses}: . a other we ewes k6 GU, em ‘0. ‘_ if - Lad; otffiioéumfi aggitigafi or Cami-3* NA" be gum“ ggoWicr ‘ ‘ ‘ c. %a\m\ Qg’fiflmklfiy soccx‘islflex’ t! momma)! d 6 OWQ (M105, %\\\W‘€f“ POWK‘XM 00 (5(0va (0k, 09 \Ole V"- mggWC—r wigs \M .. . n , Nadfllfifi (mfg? W60“: We suggests , e33 was We; 3. China and the United States have reeentl-y had: tmr‘mituous trade relations. Our models suggest that free trade is advantageous to all trading partners. a. What are the specifications ofthe .Ricardian model of trade (describe-it)? ' How does it show that free trade is advantageous? (in words) (6 points) (buddies sum gawk-£6.10 936mg first W63! atodwi with ex \owef (Jul toxin O$\% tjttff$ . 3 I Name: , Economics 115B Winter 2011 Dr. Janine L.F-. Wiison is. What --are the specifications of the Heckschepohlin model of trade? Assume that the US is relatively abunciant in capital and China is relatiVely abundant in labor. The two countries produce textiles which are labor intensive and automobiles which are capital intensive. Use the folloWing example to explain your answer. i. Draw PPFS below for China and the US. given the information above if there was no trade. (4 points) Automobiles Automobiles United States ii. What is the relationship between the relative price ratios in each country in autarky? Fill in the blank between the ratios with a >, =, or <. (4 points) China US WE < P_tcxtiles PChtna PUS automobiles automobiles iii. Draw an example of a potential production and consumption allocation in antarky-and mark it “A” on each PPF. Be'sure to draw the corresponding price ratio line. Now draw an example of a price ratio that could be established if the US. and China decided to trade (draw the line defining the ratio tangent to each PPF). Label a point “C” Where each country. could end consuming up after specialization and trade. (6 points) U Name: Economics 1 153 Winter 201 1 Dr. Janine L.F. Wilson iv. What does the Heckscher-ohlin Theory predict will happen to the price-of capital in the U. S. ? Why? (4 points) \ 091 \lrcfl \o \\\ me bk, the, \Qgpcjfea56 (if MOCB’WH 09 atosromb boas (h \f1\NC §fl0€$QJP We $3: 9&0. ‘ Mm v. What' 13 the main difference between the Rlcardian and Heckscher Ohlin models of trade? (4 points) @me .. heck gigeuoo {realm-)0 o. The above models have assumptions that do not always work in the real world. What are three aspects of “free trade” modeling that development economists . have found problematic Please explain them and relate one of these to the k Chinese economy. (8 points) ‘ i.- l’robleml —- ‘QISXTC1\\ $135 0376 «(“er EM\ M403 Rae-5 KW \U\\\=ee \0 86335 é\(&(0 ii ProblemZ ,— WWDSGNBOS dg‘wogt AQQSCVQS \ ' K \ ' WWW \n X?“ Emlégm \a :: (emcee 03m we moon (30?. \Nl f. Rhee. on iii Problem 3 .. Q’Vfi WE WHrs‘ \CDan a??? _ A fififl‘w‘l’xm 0% $fi~x®$ (new be \\. as?“ . . Gk WVTKCBD \S QQX‘ c&m§ 1?“ ole)! mew: iv. Relate to China Name: Economics 1 15B Winter 2011 Dr. Janine LP. Wiison (1. Two main industrial policies have been used in the past to guicie trade regimes in developing countries, import substitution and export promotion. Please define these trade regime strategies and discuss their advantages and disadvantages: i. Import substitution (6 points) 1. Definition deem ‘fi irks: cm 1'. QM ingOfis \N M g? o \L ‘00. 2. Advantages In9a0¥ worm» Wireériom ii. Export promotion (6 points) '. 0‘96“ 1. Definition * ex (is; so use \‘ gimm§§£§ oigocnososxeré $9 flmwaow economj _ 2. Advantages r X—VRQE) ‘ “was r (isms . .. Ci «3% e (30% 6 W ”’5’" EC 1:0 “if $346M AMECW- 3. Disadvantages OW“ CQQW \Qfi ©C€C§( h‘fifig " imfi can skew 3001’ 8mm 6. Did China choose to adopt more of an import substitution or export promotion strategy? Explain why you believe this to be true. (4 points) Name: Economics 1153 Winter 2011 ‘ Dr. Janine L.F. Wilson . If Dombuseh had been present when Chinese trade reform was discussed in 1990 how would he have suggested the Chinese reform their trade regime? Why do you believe this to be true? (6 points) Th?) “999% “sf—‘5 gmoeek veil-own . w, Memes Ame (gem mas \M‘u\\ Kmeddr demech god S ‘ (\\ X094 \HC h deemexscqw 0W5 engages AV '. {i 3} 0w \0 men . Re"; h @1an 0 Q :61 ONQOCM Ava“ g. If Jeffirey Sachs had been present when Chinese trade reform was discussed in 1990 how would he have suggested the Chinese reform their trade regime? Why do you believe this to be true (Be sure to mention the 5 pillars)? (6 points) fix“ %O\\Vi (3‘0 L'Kb-eyoA‘Q; 0340 \(‘x “Fm eke:- film 39c} O\\ Sent-aw “39‘ lfixflfiothob \Xvofmenltaflw‘om 5v a? lease“ m§e(m ; ...
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