University of Washington                                   Geography 349                                          Winter 1999
FIRST  TEST
 

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.

2. Refer to the attached U.S. International Transactions Table (1997).  
3. Krugman argues that the reduction in manufacturing as a proportion of U.S. GDP has two causes that are more important than the negative U.S. trade balance.  What are these two causes?
 
 
4. List and define the four levels of international economic integration.  Where on this list would you place NAFTA?  Where on this list would you place the EU in 1998?
 

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?