University of Washington | Tacoma
Geography 349
Winter 2014

PREPARING  FOR  THE  FIRST  IN-CLASS  TEST

Basically, everything from my online notes, as elaborated in class, and the written exercises is reasonable material for the test:  if I thought it was important enough to write about it myself or to have you write about it, it's important enough for a test.  Here are some specific issues and questions.


You might want to take a look at Test 1 from earlier years.


Refer back to RP1
> Which countries were the 5 largest merchandise exporters in 2012? 
> How would you explain the changes in the list of largest exporters in 1948 (immediately following World War II) and 2012?
> Which countries were the 5 largest service exporters in 2012?


Of course, a major purpose of the course is to be able to make sense of these trade flows, so I might ask you to explain -- to make sense of -- those patterns by using any (combination) of the trade "theories" (frameworks or explanations) we've studied.


What is "fordism"?  How was it reflected in the major flows of international trade during the postwar period?  What aspects of contemporary trade patterns are the result of post-fordism?


I want you to be able to interpret a trade-balance table, and to understand the relationship among components of the economy (see examples of these online).  Don't bother to memorize any of the numbers presented online;  if I want you to work with such a table, I'll provide the table.


I have repeatedly referred to a key relationship between trade balances and capital flows;  what is that relationship?  How is that relationship manifested on a table of a country's international accounts?


Be very conversant with the neoclassical theory of international trade.  (The online notes and DRS Ch. 6 are especially helpful;  but I've referred to other resources as well -- see the 14 and 16 January assignments in the syllabus). 
> Why is it a "normative" theory? 
> Why is it a "deductive" theory? 
>What basic question does it try to answer? 
> How does it answer that question?  (I.e., be able to explain basic trade theory.)  As you explain this, make use of (and be able to define, if I ask) terms such as "opportunity costs," "comparative advantage,"  "factor proportions," and "gains from trade." 
> What are some of the key assumptions of this approach?  (These are not the simplifying assumptions we used, such as only 2 countries, 2 products, and 2 factors;  or the absence of transportation costs -- those are not the key assumptions, and we can make full use of this model without
those assumptions). 
> If you rely on this theory, what group(s) within a country should benefit if that country moves from autarky (no trade) toward free trade?  What group(s) within a country should be harmed?
> In what way(s) might the "real world" differ from each of those key assumptions?
> Understand the concept of factor price equalization, and the limits to it in practice.


What is the Leontief paradox?  What was paradoxical about Leontief's findings?  Understand three ways to resolve the paradox.


Have a basic understanding of the product life cycle of international trade and investment, and how it might help explain the Leontief paradox.


How does "new trade theory" modify the basic neoclassical model?


I will very likely ask you to interpret and to make use of our formula G1 = (A1/B2)(C2/C1) - a1/b1.  There's no need to memorize that set of letters and numbers:  I'd give you that, and I'd tell you that a & b are products, 1 & 2 are countries, etc.  What you're responsible for is the interpretation of these ratios and of each term -- and being able to use the formula.


What does each of the three ratios of the gains-from-trade formula (the formula in red) suggest for government (and perhaps corporate) policies in a country that wants to maximize its gains from trade?  [I.e., I’m looking for three policies, each suggested by one of the three ratios in that formula.]
 

Why might the goal of maximizing exports (e.g., the US exporting as much beef as it possibly can) call for different policy from the goal of maximizing the gains from trade (the US wanting to maximize the number of cameras it gets in return for each unit of beef it exports)?
 

Identify three sources of political opposition to trade liberalization.


Be able to define the key forms of trade barriers.  DRS Ch. 7 is also useful (but optional).


Be able to speak to the different arguments for trade barriers, from the online notes


What are the basic effects of economic integration?  (Why is it called "economic integration"?)  What is factor price equalization?


Know the three key institutions of multilateral trade liberalization, and the levels of regional economic integration which are allowed by the WTO despite the MFN provision of the WTO.   Be able to distinguish trade creation from trade diversion (also see here).


What are the major factors that influence changes in the value of a currency?  How does each influence operate (e.g., in what direction is the influence)?




copyright James W. Harrington, Jr.
revised 2 February 2014