A. SHORT ANSWER [10 points]

Answer each question in the space provided. Do not use complete sentences.

1. Refer to the attached U.S. National Income and Product Accounts table.
1. If the difference between savings and investment equals the difference between exports and imports, what was the value of savings in the US in 1998 (as a proportion of GDP)?
2. What was the size of net capital inflow into the U.S. in 1998, as a percentage of GDP?
2. Refer to the attached U.S. International Transactions Table (1998).
1. How would you interpret negative numbers?
2. What does "U.S. assets abroad, net change" mean?
3. What does "Foreign assets in U.S., net change" mean?
4. What’s the significance of the sum of Rows 40 and 55?
5. What does "Balance on goods" mean?
6. What does "Balance on current account" mean?
7. The sum of Rows 1, 18, 35, 40, 55, and 70 equals zero. One reason is a simple accounting trick related to Row 70: what is it?
8. Another reason is much more fundamental: what is it?

where

GDP is given in billions of current dollars
 

Year	GDP	C	I	G	X	M
1933	$ 56.2	82%	3%	15%	4%	3%
1945	223.2	54%	5%	42%	3%	3%
1965	719.1	62%	16%	21%	5%	4%
1973	1,382.6	62%	18%	21%	7%	7%
1987	4,692.3	66%	16%	21%	6%	11%
1998	8,759.9	67%	17%	17%	11%	13%

 

Source: U.S. Department of Commerce, Bureau of Economic Analysis

U.S. INTERNATIONAL TRANSACTIONS, 1998

Source: Bureau of Economic Analysis, International Accounts Data, Balance of Payments Tables

http://www.bea.doc.gov/bea/di/boptab1.pdf

(all figures in millions of current U.S. dollars)
 

1	Exports of goods, services, income	1,192,231
3	Goods, excluding military	670,246
4	Services (travel, royalties, private services)	263,661
12	Income receipts on U.S. assets abroad	258,324
18	Imports of goods, services, and income	-1,368,718
20	Goods, excluding military	-917,178
21	Services (travel, royalties, private services)	-181,011
29	Income payments on foreign assets in U.S.	-270,529
35	Unilateral transfers, net	-44,075
40	U.S. assets abroad, net change	-292,818
55	Foreign assets in U.S., net change	502,637
70	Statistical discrepancy	-10,743
71	Balance on goods = (3) + (20)	-246,932
72	Balance on services = (4) + (21)	82,650
73	Balance on goods and services = (71) + (72)	-164,282
76	Balance on current account = (1) + (18) + (35) = (40) + (55) + (70)	-220,562

U.S. GDP, 1998 (1998 dollars) 8,759,900
 
 

ESSAY [30 points]

Write an essay that does the following:

1.Trace the historical development of practices and theories of international trade (from mercantilism through new trade theory), as I did in class and on-line. Note how each element in this development related to trends in political, economic, or intellectual history. When you present the dominant neoclassical model of trade, be sure to go on to explain what leads to comparative advantage, and how we might resolve the Leontief paradox concerning specialization, trade, and comparative advantage.
 
 

Write essays on two of the following three topics:

2.Present four arguments in favor of restrictive or protective trade policies, and critique each. (It's fine to conclude that some of the arguments remain strong, after your critique, if that's your reasoned conclusion).

3.What does "competitiveness" mean? Relate it to "comparative advantage." Why does Krugman argue that competitiveness is "a dangerous obsession": why is the analogy "wrong" in some sense, and what negative outcomes might follow from thinking about trade in this way?

4. Provide a brief, historical overview of Mexican or Canadian trade policy, relating the changes in the policy to economic, social, or political changes in the country and in the U.S.