Here is the 4 question for homework.
1. Write up a case that discusses the HO Model for two countries in real life. Consider all the assumptions related to the HO Model.
a. Describe the pattern of production and pattern of trade in both countries. Show that mutually beneficial trade between the two countries is possible. Which theorem applies?
Illustrate with an appropriate diagram using PPFs, indifference curves etc.
What happens to the factor prices in both countries when they move from autarky to free trade? Which theorem applies? What group in which country would you expects to support free trade? Why?
b. Assume that a huge amount of labor force is laid off due to the recession in one country. State and illustrate the effect of these events on income distribution: wage rate, price of capital, allocation of factors of production and output in this country.
Refer the related theorems in the context of H-O Model.
2. Consider the Balance of Payments (BOP) for a country you choose, other than Turkey, between 2000-2011. Please include the BOP while you submit your final exam.
a. What are the main characteristics of the BOP for this country? Discuss at least five of them?
1. Trade Balance:
2. Current Account Balance:
3. Portfolio Invetsment:
4. Foreign Direct Investment:
5. International Reserves:
b. How does the global crisis affect this country’s foreign trade?
c. Discuss the challenges and opportunities that this country faces in global trade enviroment? Please provide policies regarding challenges and discuss policy implications.
3. Global trading System
a. What are the main features of global trading system today?
b. What are the challenges in current global trading system?
“Two contradictory trends are at work in the global economy. Corporate globalization has led to multinational supply networks that promote convergence and integration. These global value chains have become the world economy’s backbone. But working against this is an economic crisis pushing economies towards protectionism and the consequent disintegration of these networks. This could adversely affect vulnerable, trade-dependent states.
The World Trade Organization (WTO) has played an important role in stemming the tide of protectionism. Yet WTO members have still not concluded the Doha Development Round, even though most governments realize that raising barriers to trade ultimately harms domestic industries. It is very important for countries to have open and predictable trade and investment regimes, including efficient logistics.”
a. Do you agree or disagree with the above quotation? Evaluate and critically discuss the pros and cons of protectionism.
b. What are the traditional arguments or ‘old policy approach’ for protectionism? Please discuss.
c. What are the new arguments or ‘new policy approach’ for protectionism? Please discuss at least four