ECF5921 International Economics - Final test answers / solution
1.
a. Explain why, despite of the teaching of the theory of trade, globalisation can cause negative consequences for some nations. (6 marks)
b. Give and discuss an example. (4 Marks)
2.
a. Based on an appropriate theory and examples, discuss, using the two-factor model, what is the reason for comparative advantage of each of two large nations engaged in trade. (6 marks)
b. Give and discuss an example. (4 marks)
3.
a. Using an appropriate theory discuss how an import quota can affect the welfare of a small nation. (5 marks)
b. Give an example and explain who gains and who loses? (5 marks)
4.
a. Using an appropriate theory, explain how trade creation and trade diversion affect the welfare of a small nation – a member of a custom union. (5 marks)
b. Give an example and explain who gains and who loses? (5 marks)
5.
a. Define import substitution and export orientation. (4 marks)
6.
a. Explain the relative purchasing power theory of exchange rate determination. (5 marks)
b. What are the advantages and disadvantages of this theory? (5 marks)