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Assignment
[1]
2. When the value of the
US
dollar falls in relations to the
currencies of other
nations, what do
you think will happen to the quantity of US
(a) imports?
(b)
exports?
Answer:
(a)
When
the value of the U.S. dollar falls in relation to
the currencies of other nations,
imports
become
more
expensive
for
Americans
and
so
they
would
purchase
a
smaller quantity of imports.
(b)
When the value of the
U.S. dollar falls in relation to the currencies of
other nations,
exports
become
chapter
for
foreigners
and
so
they
would
purchase
a
greater
quantity of U.S.
exports.
[2]
5.
(a)How do international economic relations differ
from interregional economic
relations?
(b) In what way are they similar?
Answer:
(a)
Restrictions
imposed
on
the
flow
of
goods,
services,
and
factors
across
their
borders, but not
internally.
International
flows
are
to
some
extent
hampered
by
differences
in
language,
customs, and laws
International flows of
goods, services, resources give rise to payments
and receipts
in foreign currencies,
which change in value over time
(b)
Both international and
interregional economic relations involve the
overcoming of
space or distance.
Indeed, they both
arise from
the problems created by
distance.
This distinguishes them from the rest
of economics, which abstracts from space and
treats the economy as a single point in
space, in which production, exchange, and
consumption take place.
[3]
15. Table 2.5 shows
bushels of wheat and the yards of cloth that the
US and the
UK can produce with one hour
of labor time under four different hypothetical
situation. In each case, identify the
commodity in which the US and UK have an
absolute advantage or disadvantage?
Table 2.5
Case A
Case B
Case C
Case D
US
UK
US
UK
US
UK
US
UK
wheat
(bushels/man-hour)
4
1
4
1
4
1
4
2
cloth (yard/man-hour)
1
2
3
2
2
2
2
1
Answer:
In
case
A,
the
united
states
has
an
absolute
advantage
in
wheat
and
the
united
kingdom in cloth.
In case B,
the united states has an
absolute advantage (so that the united kingdom
has an absolute disadvantage)in cloth
commodities.
In
case
C,
the
united
states
has
an
absolute
advantage
in
wheat
but
has
neither
advantage nor disvantage in cloth.
In
case
D,
the
united
states
has
an
absolute
advantage
over
the
united
kingdom
in
cloth
commodities.
[4]
16.
With
respect
to
Table
2.5,
indicating
in
each
case
whether
or
not
trade
is
possible
and the basis for trade?
Answer:
In
case
A,
the
united
states
has
a
comparative
advantage
in
wheat
and
the
united
kingdom in cloth.
In case B,
the united states has a comparative advantage and
the united kingdom in
cloth.
In case C, the united states has a
comparative advantage and the united kingdom in
cloth.
In case D, the united
states and the united kingdom have a comparative
advantage in
neither commodities.
[5]
18. If you
have traveled to poor developing countries, you
will have noticed that
people there
consume very different goods and services than US
consumers. Does
this mean that tastes
in developing countries are very different from US
tastes?
Explain.
Answer:
People
in developing countries consume very different
goods and services than U.S.
consumers
not because tastes are very different from the
tastes of U.S. consumers but
because
incomes are so different (much lower) than in the
United States.