A. DEFINITIONS
Write a brief definition for each of the following; no need
to use complete sentences.
1. countervailing duty
2. discriminatory procurement
3. dumping
4. foreign direct investment
5. foreign investment
6. GATT (tell what the acronym stands for, and then define)
7. quota
8. tariff
9. WTO (tell what the acronym stands for, and then define)
B. SHORT ANSWER
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.
C. ESSAYS
Write two brief essays, based on two of the sets of questions below.
Start in the space provided; ask for additional paper if you need
it.
1. Present the dominant economic theory of trade: What does it
try to explain? How does it try to explain it? What does it
predict to be the result of increased trade on the prices of products and
on the prices of factors in the trading countries? (Along the way,
you should define and use the concepts of opportunity costs, comparative
advantage, and factor proportions).
2. What is the Leontief paradox, and what’s paradoxical about it?
What method did Leontief use to uncover the paradox? Suggest two
ways to resolve the paradox, and note whether each way supports or contradicts
the theory of factor proportions.
3. Define and present the product life cycle model of international
trade and investment. How does the model attempt to resolve the Leontief
paradox?
4. How, and how well, does the basic theory of international trade
(that there are gains from specialization and trade according to comparative
advantage, and that comparative advantage is based on factor proportions)
explain what's happened in the course of North American trade liberalization?
What are some shortcomings of the theory? How does the theory help
make sense of some of the things that have happened since (or during) liberalization?
5. Present three negative effects of trade liberalization (and characterize
each as economic, political, cultural or some specific combination).
In each case, suggest an economic approach to mitigate the effect (or to
place it in larger context), and then present a counter-argument to the
economic argument. How do you feel about each effect?