Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 19, Problem 5E
a)
To determine
The autarky situation of the economy.
b)
To determine
The free trade situation of the economy.
c)
To determine
The
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Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000.
(g) If the terms of trade is 2 to 1 in favour of the country with the comparative advantage in food. Determine the combination of the two goods that each country will consume after trade if the country with the comparative advantage in fuel imports 4000 units of food. Label this point B and B* respectively.
h) Who gains from trade? Who loses? What is the impact if any on the world?
(i) What should the terms of trade be to make trade beneficial for BOTH Japan and Peru? Explain.
International Trade
Suppose the production of chocolate and wine per hour of labor in Italy and France is as follows:
Chocolate (C)
Wine (W)
Italy (I)
8 bars
4 bottles
France (F)
6 bars
2 bottles
a) Which country has the absolute advantage in chocolate production? Does the same country also have the comparative advantage in chocolate production? Explain your answers.
b) Suppose that with free trade the price of one bottle of wine is 2.5 bars of chocolate. Further suppose that 100 million hours of labor are available in both countries. Carefully draw the production possibility curves in each country both with and without free trade. With reference to the graphs, briefly explain in words how free trade can help both countries become better off.
The Economic Commission for Latin America and the Caribbean (ECLAC) says the region’s foreign trade in 2020 had its worst performance since the global financial crisis of 2008-2009, because of the economic crisis prompted by the global COVID-19 pandemic and the restrictions imposed by governments to stop its spread. (Daily Gleaner, dated September 27, 2021)
List and explain three (3) benefits of international trade.
Outline two (2) trade restrictions the government could have implementedto stop the spread of the virus.
Chapter 19 Solutions
Macroeconomics (Fourth Edition)
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Similar questions
- International trade: If Germany (which is a large country) imposes an import tariff on textile imports, we can conclude that: (a)The world price of textile rises, and Germany imports less. (b)The world price of textile stays constant, and Germany imports less. (c)The world price of textile falls, and Germany imports less. (d)The world price of textile stays constant, and Germany imports the same as before. Explain your answer clearly. Limit your explanation to 200 words.arrow_forwardSuppose that Vietnam has the usual demand and supply curves for producing computers while Myanmar only has a typical demand curve, but it cannot produce computers. Use the three-panel diagram described in Week 2 lecture content to: Show in a set of graphs the free-trade equilibrium for computers. Indicate the equilibrium world price. How does this world price compare to the no-trade price in Vietnam? Indicate how many computers are traded under free international trade. Make sure to state the assumptions. Show graphically and explain the effects of the shift from no trade to free trade on surpluses in each country. Indicate the net national gain or loss from no trade to free trade for each country. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardQuestion 1: Assume there are two nations: Panama and Guatemala that produce two commodities: coconuts and passion fruits. The table below contains the amount of each commodity produced per hour of labour in the two nations in terms of Kg. Panama Guatemala Passion fruits 9 4 Соconuts 6. c) Suppose passion fruits and coconuts are exchanged internationally at a rate of 1.2 passion fruit per coconut. Which country will export coconuts and why? Assuming both countries have 180 hours of labour each, draw the PPFS of both countries to your answer and explain why both countries are better off after trade. illustrate d) Draw the world supply curve of coconuts.arrow_forward
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