ECON8047 : Evaluate the Impact of Trade Related Issues on Countries Based on Trade Concepts and Theories - Economics Assignment Help

Assignment Task:

TASK:

ONLINE TEST 1 RUBRIC
This assessment task relates to the following learning outcomes:
Knowledge and Understanding: Be conversant with major trade theories and policy measures.
Application and Critical Thinking: Evaluate the impact of trade-related issues on countries based on trade concepts and theories

QUESTION 1
Provide and explain in detail, the reasons for the resurgence of trade that led to the first golden age of international trade. (10 marks)
-220980-315595The major reasons for the resurgence of international trade in the first golden age majorly revolved around the improvement of transportation efficiency; which impacted transport costs positively hence culminated into more opportunities for international trade. At this time, the major forms of transport were by road, rail or sea. The following are some of the key reasons summarily:
The evolution of steamship technology – the ability of bulky goods to be moved across the sea from the invention and innovation of steam powered engines. These enabled the hauling of more cargo due to the power of the steam engines across large distances.
The improvement of railroad networks – areas that had strong trade interactions benefited majorly from the interconnectivity railways brought about. These enabled, for example, factories to have an all-time avenue by which they could transport their raw materials and finished produce. The efficiencies this brought about led to increased outputs hence the resurgence of international trade.
The upgrading of road networks – with the need to move goods and services across large tracts of land, roads were demarcated and some paved so that goods and people would be able to travel more efficiently.
[Word count: 195 words]
[Max 200 words]
00The major reasons for the resurgence of international trade in the first golden age majorly revolved around the improvement of transportation efficiency; which impacted transport costs positively hence culminated into more opportunities for international trade. At this time, the major forms of transport were by road, rail or sea. The following are some of the key reasons summarily:
The evolution of steamship technology – the ability of bulky goods to be moved across the sea from the invention and innovation of steam powered engines. These enabled the hauling of more cargo due to the power of the steam engines across large distances.
The improvement of railroad networks – areas that had strong trade interactions benefited majorly from the interconnectivity railways brought about. These enabled, for example, factories to have an all-time avenue by which they could transport their raw materials and finished produce. The efficiencies this brought about led to increased outputs hence the resurgence of international trade.
The upgrading of road networks – with the need to move goods and services across large tracts of land, roads were demarcated and some paved so that goods and people would be able to travel more efficiently.
[Word count: 195 words]
[Max 200 words]

QUESTION 2
In 1975, wage levels in South Korea were roughly 5% of those in the United States. If United States had allowed Korean goods to be freely imported then this would have caused devastation to the standard of living in the United States, because no producer in this country could possibly compete with such low wages. Discuss this assertion.-3460751885950On the one hand, the assertion fronted above does not seem to hold water. When fronting the theory of Absolute Advantage, Adam Smith actually asserts that it is illogical for a country to attempt to produce what a foreign country can supply cheaper than can be produced locally. This is because the foreign country has an absolute advantage in production of such goods in that it is able to produce them with fewer resources. Going by the Absolute Advantage theory, each country has an absolute advantage over the other in some industries hence an opportunity for countries to trade internationally to maximally reap the benefits of their productivity. This is by selling what they have an absolute advantage in and buying what they cannot produce cheaply.
On the other hand, the assertion could only make sense if there did not exist any Absolute Advantage in the industries of South Korea and the US. However, going by the Ricardo’s Comparative Advantage, it is still possible for countries to benefit mutually even if there is no absolute advantage in both. This is because when comparing the opportunity costs involved in not producing certain products it may still be logical for both countries to trade. For example, the US would have allowed some goods from South Korea to reap the merit of cheap goods, but still produce those goods which the opportunity costs would be so high to outsource. In the long run, this would lead to international trade co-operation among the countries.
[Word count: 250 words]
[Max 250 words]
00On the one hand, the assertion fronted above does not seem to hold water. When fronting the theory of Absolute Advantage, Adam Smith actually asserts that it is illogical for a country to attempt to produce what a foreign country can supply cheaper than can be produced locally. This is because the foreign country has an absolute advantage in production of such goods in that it is able to produce them with fewer resources. Going by the Absolute Advantage theory, each country has an absolute advantage over the other in some industries hence an opportunity for countries to trade internationally to maximally reap the benefits of their productivity. This is by selling what they have an absolute advantage in and buying what they cannot produce cheaply.
On the other hand, the assertion could only make sense if there did not exist any Absolute Advantage in the industries of South Korea and the US. However, going by the Ricardo’s Comparative Advantage, it is still possible for countries to benefit mutually even if there is no absolute advantage in both. This is because when comparing the opportunity costs involved in not producing certain products it may still be logical for both countries to trade. For example, the US would have allowed some goods from South Korea to reap the merit of cheap goods, but still produce those goods which the opportunity costs would be so high to outsource. In the long run, this would lead to international trade co-operation among the countries.
[Word count: 250 words]
[Max 250 words]

QUESTION 3

• The following graph depicts how the Home country trades in a specific factor model with two industries. land is specific to the agriculture industry, capital is specific to the manufacturing industry, labour is freely movable between the two industries. The output of agriculture and manufacturing industries are on the vertical and horizontal axis respectively, Determine the following:
• What’s Home’s comparative advantage? Why? (2 marks)
• Which points on the graph shows (1) Home’s equilibrium when there’s no trade (2) Home’s production and consumption when there’s trade. Explain why. (3 marks)
• Which good is imported and which is exported by Home? Explain. (2 marks)
• Explain why the overall gains from trade are still positive. (3 marks)

QUESTION 4

• This problem uses the Heckscher–Ohlin model to predict the direction of trade. Consider the production of handmade rugs and assembly line robots in Canada and India.
• Which country would you expect to be relatively labour-abundant, and which is capital-abundant? Why? (2 marks)
• Which industry would you expect to be relatively labour-intensive, and which is capital-intensive? Why? (2 marks)
• Which of the following two graphs (Graph 1 is on the left, Graph 2 is on the right) depicts trade in Canada, why? For triangles BCD (in Graph 1) and B'C'D' (in Graph 2), identify the relevant portions that show imports and exports in Canada and India, explain. (6 marks)

QUESTION 5

• Suppose that computers use 2 units of capital for each worker, so that KC = 2×LC, whereas shoes use 0.5 units of capital for each worker, so that KS = 0.5×LS. There are 300 workers and 300 units of capital in the economy.
• Solve for the amount of labour and capital used in each industry. (2 marks)
• Suppose that the number of workers increases to 350 because of immigration, keeping total capital fixed at 300. Solve for the amount of labour and capital used in each industry. (2 marks)
• Suppose instead that the amount of capital increases to 350 due to FDI, keeping the total number of workers fixed at 300. Solve for the amount of labour and capital used in each industry. (2 marks)
• Explain how your results in parts (b) and (c) are related to the Rybczynski theorem. (4 marks)
   

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