International Economics Essay

1. Why did the Mer roll in the haytilists allot holdings of unparalleled metals so important to nation-state construct? (6 points)Wealth was viewed as synonymous with holdings of unique metals. Nation-states wished to become wealthy and this meant obtaining large holdings of unparalleled metals. It is also argued by some that the shortage of neology constrained the growth of these nation-sates and that precious metals were required to increase the supply of coinage (m social unitary(a)y) in order for the countries to grow.2. Assume that both(prenominal) the coupled States and Germany disclose screech and computer chips with the following monetary values (12 points)a. What is the chance cost of skreigh (B) and computer chips (C) in for each one country?In the joined States the opport building blocky cost of one unit of beef is 2 chips the luck cost of one chip is 1/2 unit of beef. In Germany the opportunity cost of one unit of beef is 4 chips the opportunity cost of on echip is 1/4 unit of beef. b. In which commodity does the coupled States have a proportional cost expediency? What about Germany?The joined States has a comparative cost profit in beef with respect to Germany, maculation Germany has a comparative cost advantage in computer chips.c. What is the regularise for reciprocally beneficial swap between the join States and Germany for each computer chip look atd? The range for mutually beneficial allot between the get together States and Germany for each unit of beef that the United States exports is 2C 1B 4Cd. How much would the United States and Germany name if 1 unit of beef is transfer for 3 chips? Both the United States and Germany would move on 1 chip for each unit of beef traded.3. If U.S. productivity growth does non keep up with that of its trading partners, the United States allow quickly lose its world(prenominal) competitiveness and not be adapted to export any products, and its standard of animation will fall. Critically evaluate this program line in light of what you have larn in chapter 3 of the textbook. (10 points)This statement could be true if trade was based on absolute advantage. However, since trade arouse regaining place on the background of comparative advantage, what counts is sexual relation cost differences. Consequently a country can be little efficient or become less(prenominal) efficient in all matures and still again from trade as farsighted as there ar relative cost differences in autarky. Thus, different place of productivity growth may motley what a country exports, but it is unbelievable that it would ever take away the basis for trade, its ability to expert.4. The following table shows the result of old age of industry required to produce a unit of fabrics and simple machinemobiles in the United farming and the United States (12 points)TextilesAutosUnited Kingdom3 years6 daysUnited States2 days5 daysa. Calculate the number of units of text iles and autos that can be produced from 1 day of drive in each country.In the United Kingdom one day of labor can produce 1/3 of a unit of textiles and 1/6 of a unit of automobiles. In the United States, one day of labor can produce of a unit of textiles and 1/5 of a unit of automobiles. b. figure that the United States has 1,000 days of labor available. cause the business-possibilities frontier for the United States. five hundred U.Sc. build the U.S. function-possibilities frontier with trade if the basis of trade are 1 auto 2 units of textiles.500 textiles U.Sd. Select a pre-trade use point for the United States, and indicate how trade can yield a breathing in point that gives the United States greater uptake of both goods.500 textiles U.S5. In the precedent question, suppose that the United States always wishes to receive autos and textiles at the ratio of 1 auto to 10 textiles. What quantity of each good would the United States consume in autarky? What combination would the United States consume with trade and complete specialization? What would be the gains from trade? (10 points)In autarky, the take ( and economic aspiration ) of textiles and autos will utilize all the available curtilage days of labor. Thus, with T = number of units of textiles produced and A = number of autos produced, 1000 = ( 2 days / unit) T + (5 days / unit )A. The consumption requirement is that 10 units of textiles be consumed for each unit of automobiles. Hence, total textile proceeds is partake to (10) ( total auto production), 10A thus, accustomed the available labor, and substituting 10A for T,1000 = (2)(10A) + 5 AA= 40 unitsIf A = 40 units, then textile production and trade, textile production equal 500 units. Consumption of textiles (CT) is equal to textile production minus the textile exports used to necessitate auto imports, and auto imports are equal to auto consumption (CA). With the international terms of trade of 1A2T, auto imports = (1A/2T)(exp orts of textiles) = (1A/2T)*(textile production textile consumption). By the demand assumption, consumption of auto is also equal to (1/10)(textile concumption). Hence , CA = (1/2)(500 CT ) and CA = (1/10)(CT). Thus,(1/2)(500- CT) = (1/10)(CT)250 (1/2)(CT) = (1/10)(CT)0.6CT = 250CT = 416 2/3 unitsWith Ct = 416 2/3 units, CA therefore equals 41 2/3 Unitts. Because of specialization and trade, the united States had gained 16 2/3 Units of textiles ( 416 2/3 400 ) and 1 2/3 ( 41 2/3 40 ) in comparison with autarky situation.another(prenominal) method of arriving at these results is to utilize the equatings for the PPF and for the consumption pattern. In autarky the PPF equation is T = 500 2 A, and the consumption equation is CT = 10CA. Solving the cardinal equations for the two unknowns yields A = CA = 40 and T = CT = 400. Withtrade, the equations to be utilized are for the consumption- possibilities frontier with trade has the equation T = 500 2A. When this equation is put with the consumption equation CT = 10 CA and the two equation are resolved for two unknowns, the equilibrium results areA = CA = 41 2/3ANDT = CT = 416 2/3