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Week 3 Seminar International Trade

Contemporary Issues in Global Economics

Readings
Michael Todaro, 12th ed. Chapter 12
Dominick Salvatore, 11th ed. Chapters 2&3

Seminar questions
1. Please define following terminologies:
Economic growth an increase in the amount of goods and
services produced per head of the population over a period of time.
International trade exchange of capital, goods, and services
across international borders or territories.
Globalization the increasing integration of national economies
into expanding international markets.
Development the process of improving the quality of all
human lives and capabilities.

2. Why some countries got richer than others? What is the role of
international trade in economic growth?

3. Discuss the following questions in groups, one question to a


group.

How does international trade affect economic growth?


How does trade alter the distribution of income?
How can trade promote development?
Can developing countries determine how much they trade?
Is an outward-looking or an inward-looking trade policy best?

4. Please define the following:


comparative advantage;
absolute advantage;
Heckscher ohlin (H-O) theorem;
Factor Proportions and Different Factor Endowments.

5. What does comparative advantage and absolute advantage tell us


about the pattern of trade?

6. Why is it argued that trade is good for an economy?


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7. Describe the mechanisms through which trade can help an


economy grow.

8. Consider the following cases


Case A US UK
Wheat (bushels/hour) 4 1
Cloth ( yards/hour) 1 2

Case B US UK
Wheat (bushels/hour) 4 1
Cloth ( yards/hour) 3 2

Case C US UK
Wheat (bushels/hour) 4 1
Cloth ( yards/hour) 2 2

Case D US UK
Wheat (bushels/hour) 4 1
Cloth ( yards/hour) 2 1

9. Indicate in each case, the commodity in which each nation has


the comparative advantage.
10. Indicate in each case whether trade will take place
11. Suppose that 4W is exchanged for 4C in case B
a) How much does the US gain in terms of cloth?
b) How much does the UK gain in terms of cloth?

12. What do the above examples tell us about the benefits of trade?

13. In groups make a list of arguments for and against international


trade stimulation