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What are some common aspects of developing countries with regard to the commodities they trade? Why would they be concerned with commodity price stabilization, and why do some in the developing world believe that current global trade arrangements hinder the industrialization of the developing countries.

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Sonal Bahl
Sonal BahlLv10
29 Sep 2019

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Question 3 How can tariffs protect U.S. jobs? Do tariffs lead to a net increase in jobs? Explain. Who are the winners and losers from trade restrictions? Given that trade restrictions impose losses on an economy, why are trade restrictions so common?

Question 4 Describe developing countries and how they differ from industrial market economies. How can international trade aid development? In what ways does the international economy impose problems on developing countries?

Question 5 How can two countries both be better off as a result of trade?

Two students, Ryan Wattenberg and Emma Bennett, are discussing the idea of convergence over coffee. Ryan considers convergence to be true in theory but impractical in the real world. He claims that most low-income developing countries are stuck in a cycle of poverty and so cannot catch up with developed countries. With increased globalization, Emma feels that the developing countries are growing and will converge with higher-income countries eventually. Zoey Smith, a friend of theirs, however thinks that the evidence on convergence is rather unclear. Despite the fact that developing countries are growing much faster than the developed countries, she thinks that they will not be able to catch up with the developed nations in the near future.

Which of the following, if true, would strengthen Ryan's argument that developing countries will not catch up with developed countries?

a. Most developed countries do not have similar resources endowments.

b. Some of the fastest growing developing countries in the world also score well on many social indicators.

c. Credit creation by the formal banking system in most developing countries has been falling or stagnant in the last five years.

d. High population in developing countries, which for decades acted as a drag on growth, now forms a productive workforce.

e. Most developed countries experienced a high degree of inequality in the initial phases of economic growth.

Two students, Ryan Wattenberg and Emma Bennett are discussing the idea of convergence over coffee. Ryan considers convergence to be true in theory but impractical in the real world. He claims that most low-income developing countries are stuck in a cycle of poverty and so cannot catch up with developed countries. With increased globalization, Emma feels that the developing countries are growing and will converge with higher-income countries eventually. Zoey Smith, a friend of theirs, however, thinks that the evidence on convergence is rather unclear. Despite the fact that developing countries are growing much faster than the developed countries, she thinks that they will not be able to catch up with the developed nations in the near future.

Which of the following, if true, would strengthen Emma's argument that developing countries will not catch up with developed countries?

A. Most developing nations are at the point where the cost of capital exceeds the marginal product of capital.

B. The number of bilateral and multilateral agreements relating to technology transfer from developed to developing nations has significantly increased.

C. With low public investment in healthcare, the cost of private healthcare as a proportion of average income is very high in developing.

D. Since cash flows from foreign sources are considered volatile, many developing countries have capital controls and other regulations that restrict the flow of foreign investment.

E. Unlike the developed nations, most developing countries do not have extensive government-sponsored social security programs.

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