ECON 101 Lecture 7: Lecture 07 - Distributional Consequences of Classical Trade

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25 Oct 2016

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Lecture 07 - distributional consequences of classical trade. Terms of trade are defined as (cid:3254)(cid:3291)(cid:3290) (cid:3291)(cid:3290) Distributional effects of trade: trade can have substantial effects on the income distribution within a trading country. Resources cannot move costlessly from one industry to another. Industries differ in the factors of production they demand: trade liberalization changes the relative prices of final goods. Changes in relative prices can be used to analyze distributional effects. An equal proportional change in all prices has no real effects. Relative wages in classic trade theory: in all classic trade models, wages are equal across industries in both countries (identical factors earn identical incomes, across countries, wages differ in the ricardian model. If labor productivity is higher in home, then > . Distribution effects in the heckscher-ohlin model: each country realizes overall gains from trade. Improved world-wide factor allocation: the gains are unevenly distributed. The relatively abundant factor gains unambiguously in real terms.

Related Questions

1.In the Ricardian model, wages are equal across industries because:

A.employers care for their workers.

B.workers prefer to work in exporting industries.

C.workers are freely mobile between industries.

D.workers are freely mobile between countries.

2.Suppose that the U.S. price index for its imports rose from 100 to 120 from 2010 to 2011 and the price index for its exports remained unchanged. Which of the following statements is CORRECT?

A.The U.S. terms of trade worsened between 2010 and 2011.

B.The U.S. terms of trade improved between 2010 and 2011.

C.The U.S. terms of trade improved in 2010 and worsened in 2011.

D.There was no change in the U.S. terms of trade between 2010 and 2011.

3.Assume that marginal product of labor is constant. If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with a MPLcloth = 2, what is the MPLcorn?

A.4

B.5

C.6

D.7

4.Suppose after opening up for trade the Home country produces 60 units of chemicals and 20 units of clothing. But Home consumes 40 units of chemicals and 60 units of clothing. What is the international price of chemicals?

A.1/2 unit of clothing per unit of chemicals

B.one unit of clothing per unit of chemicals

C.two units of clothing per unit of chemicals

D.three units of clothing per unit of chemicals

5.It can be shown that differences in âbefore-tradeâ relative prices will determine:

A.which nation has the absolute advantage.

B.which good each nation will export or import.

C.the quantity traded by each nation.

D.which nation has higher wages.

6.Suppose after opening up for trade the Home country produces 60 units of chemicals and 20 units of clothing. But Home consumes 40 units of chemicals and 60 units of clothing. Which product does Home export?â

A.Clothing

B.Chemicals

C.It exports neither chemicals nor clothing.

D.It exports both chemicals and clothing.

ECON 101 Lecture 7: Lecture 07 - Distributional Consequences of Classical Trade

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