Exam 18: International Trade and the Developing Countries

Would you prefer to receive a stable income of $20,000 per year for three years or an income of $15,000 in the first year, $40,000 in the second year, and $15,000 in the third year? Explain. What about $20,000 per year versus a $15,000-$50,000-$15,000 sequence? Why or why not? What about $20,000 per year versus a $15,000-$35,000-$15,000 sequence? Why or why not?

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Question 1

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It ultimately depends on an individual's financial needs and preferences.

For the first scenario, some people may prefer the stable income of $20,000 per year for three years as it provides a consistent and predictable cash flow. This can be beneficial for budgeting and planning for expenses. Others may prefer the fluctuating income of $15,000 in the first year, $40,000 in the second year, and $15,000 in the third year as it offers the potential for higher earnings in the second year, which could be used for larger expenses or investments.

In the second scenario, the choice between $20,000 per year and a $15,000-$50,000-$15,000 sequence may depend on an individual's immediate financial needs. The fluctuating income may be preferred by those who have larger expenses in the second year, while the stable income may be preferred by those who value consistency and predictability.

In the third scenario, the choice between $20,000 per year and a $15,000-$35,000-$15,000 sequence may again depend on an individual's financial needs and preferences. The fluctuating income may be preferred by those who have larger expenses in the second year, while the stable income may be preferred by those who value consistency and predictability.

Ultimately, the decision between a stable income and a fluctuating income depends on an individual's financial goals, risk tolerance, and ability to manage cash flow. It's important to carefully consider one's financial situation and future needs before making a decision.

For the World Bank's category of low-income countries, gross domestic product has been growing rapidly in recent years than in developed countries. With regard to Another characteristic of low-income countries, the ratio of their exports of goods and Services to their GDPs has in the last 15-20 years.

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Question 2

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Two characteristics of low-income countries as classified by the World Bank are that, in Comparison with high-income countries, the low-income countries have a Rate of population growth and a percentage of GDP accounted for by Agriculture.

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Question 3

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Developing countries (or LDCs) tend to have a ratio of manufactured goods exports to total exports that is than the corresponding ratio for high-income countries, and the LDCs also tend to have a degree of commodity concentration in their exports than do the high-income countries.

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Question 4

Despite the general agreement among economists on the benefits of moving to free trade,observers have noted that some developing countries may have "special" problems with regard to trade - the problems of export instability and a potential long-run deterioration of the terms of trade. Indicate the alleged nature of the problems and discuss potential causes for the problems. Then summarize and assess possible policies that could be utilized to deal with the problems. Finally, do you think that these countries should "turn inward" (i.e., become less open to trade)because of these problems? Briefly explain.

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Question 5

Other things equal, an export quota agreement to stabilize the price of a good on the World market will be more effective, the the percentage of producer Countries that take part in the agreement and the it is for countries to store (or stockpile) the good.

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Question 6

In the context of developing countries' external debt, the "debt service ratio" of a country Is the ratio of annual interest payments on the debt plus scheduled repayment of the debt (amortization) to the country's __________.

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Question 7

In international commodity agreements that specify a target range for the price of a product, if the world price of the good is above the "ceiling" price, then a buffer stock agreement would require that the international agency the product and an export quota agreement would require that countries their exports of the Good.

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Question 8

In the classification terminology of the World Bank, a "strongly-inward-oriented Economy" is one that has trade controls and consequently .

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Question 9

Utilizing material in this chapter as well as arguments for protection in Chapter 15, develop a case that the developing countries should pursue an "inward-looking" rather than an "outward-looking" strategy. Are you really convinced by the case that you have built? Why or why not?

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Question 10

Developing countries often claim that their "commodity terms of trade" have fallen over the long run. This means that (with P_x = export price index, P_m = import price index, Q_x = export quantity index, and Q_m = import quantity index) the developing countries think that there has been a decline in their __________.

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Question 11

Remembering the optimum tariff analysis of Chapter 15, explain why it might be possible that the imposition of a tariff by an LDC to improve its terms of trade (and thus hopefully to be in a better position at the start of any future deterioration) could reduce the LDC's welfare. Build the reverse case that reduction of an LDC tariff might improve the LDC's welfare at the present time, even though the terms of trade deteriorate because of the tariff reduction.

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Question 12

In the diagram in Question #13 above, where curve 0ABC relates the market value of LDC external debt to the face value of the external debt, the range indicates a situation where debt relief or forgiveness for LDCs would reduce amount of debt owed by developing countries but would also increase the market value of the debt. In this range, any one bank .

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Question 13

In the situation of transfer pricing by a multinational firm in its trade between plants located in less developed countries (LDCs) and industrialized countries (ICs), the firm, other things equal, will, if it wants to shift recorded profits from its LDC plants to its IC plants, record a price on goods sent from LDCs to ICs that is than a comparable free-market price. For goods sent from ICs to the LDCs, the firm will than a comparable free-market price.

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Question 14

In the analysis of the "debt-relief Laffer curve" pertaining to the external debt of a developing country,

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Question 15

If the demand curve for a good increases and decreases cyclically along a relatively Inelastic (or steep) supply curve, then, in this market, the size of price fluctuations will be __________ than the size of quantity fluctuations.

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Question 16

The income elasticity of demand for manufactured goods is generally thought to be than the income elasticity of demand for primary products, and the price elasticity of demand for manufactured goods (when the negative sign is ignored) is than the price elasticity of demand for primary products.

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Question 17

Using the debt-relief Laffer curve, make the case that debt relief can be in the best interest of both the developing and developed countries.

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Question 18

Which one of the following has NOT been offered as a possible reason for instability in exports of less developed countries?

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Question 19

If the supply curve of a good shifts increases and decreases cyclically along a relatively Inelastic (or steep) demand curve, then, in this market, the size of price fluctuations will Be __________ than the size of the quantity fluctuations.

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Question 20

Showing 1 - 20 of 24

Two characteristics of low-income countries as classified by the World Bank are that, in Comparison with high-income countries, the low-income countries have a Rate of population growth and a percentage of GDP accounted for by Agriculture.

Developing countries (or LDCs) tend to have a ratio of manufactured goods exports to total exports that is than the corresponding ratio for high-income countries, and the LDCs also tend to have a degree of commodity concentration in their exports than do the high-income countries.

Other things equal, an export quota agreement to stabilize the price of a good on the World market will be more effective, the the percentage of producer Countries that take part in the agreement and the it is for countries to store (or stockpile) the good.

In the context of developing countries' external debt, the "debt service ratio" of a country Is the ratio of annual interest payments on the debt plus scheduled repayment of the debt (amortization) to the country's __________.

In the classification terminology of the World Bank, a "strongly-inward-oriented Economy" is one that has trade controls and consequently .

Utilizing material in this chapter as well as arguments for protection in Chapter 15, develop a case that the developing countries should pursue an "inward-looking" rather than an "outward-looking" strategy. Are you really convinced by the case that you have built? Why or why not?

In the analysis of the "debt-relief Laffer curve" pertaining to the external debt of a developing country,

If the demand curve for a good increases and decreases cyclically along a relatively Inelastic (or steep) supply curve, then, in this market, the size of price fluctuations will be __________ than the size of quantity fluctuations.

The income elasticity of demand for manufactured goods is generally thought to be than the income elasticity of demand for primary products, and the price elasticity of demand for manufactured goods (when the negative sign is ignored) is than the price elasticity of demand for primary products.

Using the debt-relief Laffer curve, make the case that debt relief can be in the best interest of both the developing and developed countries.

Which one of the following has NOT been offered as a possible reason for instability in exports of less developed countries?

If the supply curve of a good shifts increases and decreases cyclically along a relatively Inelastic (or steep) demand curve, then, in this market, the size of price fluctuations will Be __________ than the size of the quantity fluctuations.

Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo

The Classical World of David Ricardo and Comparative Advantage

Extensions and Tests of the Classical Model of Trade

Introduction to Neoclassical Trade Theory: Tools to Be Employed

Gains From Trade in Neoclassical Theory

Offer Curves and the Terms of Trade

The Basis for Trade: Factor Endowments and the Heckscher-Ohlin Model

Empirical Tests of the Factor Endowments Approach

Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

Economic Growth and International Trade

International Factor Movements

The Instruments of Trade Policy

The Impact of Trade Policies

Arguments for Interventionist Trade Policies

Political Economy and Us Trade Policy

Economic Integration

The Balance-Of-Payments Accounts

The Foreign Exchange Market

International Financial Markets and Instruments: an Introduction

The Monetary and Portfolio Balance Approaches to External Balance

Price Adjustments and Balance-Of-Payments Disequilibrium

National Income and the Current Account

Economic Policy in the Open Economy Under Fixed Exchange Rates

Economic Policy in the Open Economy Under Flexible Exchange Rates

Prices and Output in the Open Economy: Aggregate Supply and Demand

Fixed or Flexible Exchange Rates

The International Monetary System: Past, Present, and Future

Filters

Exam 18: International Trade and the Developing Countries

Two characteristics of low-income countries as classified by the World Bank are that, in Comparison with high-income countries, the low-income countries have a __________ Rate of population growth and a __________ percentage of GDP accounted for by Agriculture.

Other things equal, an export quota agreement to stabilize the price of a good on the World market will be more effective, the __________ the percentage of producer Countries that take part in the agreement and the __________ it is for countries to store (or stockpile) the good.

In the context of developing countries' external debt, the "debt service ratio" of a country Is the ratio of annual interest payments on the debt plus scheduled repayment of the debt (amortization) to the country's __________.

In the classification terminology of the World Bank, a "strongly-inward-oriented Economy" is one that has __________ trade controls and consequently __________.

Utilizing material in this chapter as well as arguments for protection in Chapter 15, develop a case that the developing countries should pursue an "inward-looking" rather than an "outward-looking" strategy. Are you really convinced by the case that you have built? Why or why not?

In the analysis of the "debt-relief Laffer curve" pertaining to the external debt of a developing country,

If the demand curve for a good increases and decreases cyclically along a relatively Inelastic (or steep) supply curve, then, in this market, the size of price fluctuations will be __________ than the size of quantity fluctuations.

Using the debt-relief Laffer curve, make the case that debt relief can be in the best interest of both the developing and developed countries.

Which one of the following has NOT been offered as a possible reason for instability in exports of less developed countries?

If the supply curve of a good shifts increases and decreases cyclically along a relatively Inelastic (or steep) demand curve, then, in this market, the size of price fluctuations will Be __________ than the size of the quantity fluctuations.

Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo

The Classical World of David Ricardo and Comparative Advantage

Extensions and Tests of the Classical Model of Trade

Introduction to Neoclassical Trade Theory: Tools to Be Employed

Gains From Trade in Neoclassical Theory

Offer Curves and the Terms of Trade

The Basis for Trade: Factor Endowments and the Heckscher-Ohlin Model

Empirical Tests of the Factor Endowments Approach

Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

Economic Growth and International Trade

International Factor Movements

The Instruments of Trade Policy

The Impact of Trade Policies

Arguments for Interventionist Trade Policies

Political Economy and Us Trade Policy

Economic Integration

The Balance-Of-Payments Accounts

The Foreign Exchange Market

International Financial Markets and Instruments: an Introduction

The Monetary and Portfolio Balance Approaches to External Balance

Price Adjustments and Balance-Of-Payments Disequilibrium

National Income and the Current Account

Economic Policy in the Open Economy Under Fixed Exchange Rates

Economic Policy in the Open Economy Under Flexible Exchange Rates

Prices and Output in the Open Economy: Aggregate Supply and Demand

Fixed or Flexible Exchange Rates

The International Monetary System: Past, Present, and Future

Filters

Two characteristics of low-income countries as classified by the World Bank are that, in Comparison with high-income countries, the low-income countries have a Rate of population growth and a percentage of GDP accounted for by Agriculture.

Other things equal, an export quota agreement to stabilize the price of a good on the World market will be more effective, the the percentage of producer Countries that take part in the agreement and the it is for countries to store (or stockpile) the good.

In the classification terminology of the World Bank, a "strongly-inward-oriented Economy" is one that has trade controls and consequently .