MGEC62H3 Chapter 2: Chapter 2 Notes

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lavenderdonkey6

18 Oct 2011

School

UTSC

Department

Economics for Management Studies

Course

MGEC62H3

Professor

Garth Frazer

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Document Summary

Tij = a yi yj / dij. Tij = a ya i yb j / dc ij. The gravity model relates the trade between any two countries to the sizes of their economies. Using the gravity model also reveals the strong effects of distance and international borders even friendly borders like that between the us and canada in discouraging trade. International trade is at record levels relative to the size of the world economy, thanks to falling costs of transportation and communications. However, trade has not grown in a straight line: the world was highly integrated in 1914, but trade was greatly reduced by depression, protectionism, and war, and took decades to recover: manufactured goods dominate modern trade today.

Related Questions

QUESTION 7

Suppose there are only two countries in the world, Country A and Country B. The following table contains information on each country's demand and supply of some good.

	Country A	Country B
Demand	Q = 107 - 2P	Q = 167 - 1P
Supply	Q = 1P - 28	Q = 3P - 17

If there is free trade between these two countries, what would be the quantity of Net Exports in Country A?

Round your answer to two decimal places. Remember, Net Exports is Exports - Imports. If your answer is negative, be sure to include the negative sign.

QUESTION 8

Suppose there are only two countries in the world, Country A and Country B. The following table contains information on each country's demand and supply of some good.

	Country A	Country B
Demand	Q = 187 - 1P	Q = 137 - 3P
Supply	Q = 3P - 14	Q = 3P - 26

If there is free trade between these two countries, and this is the only good in which these two nations trade, what would be the value of Country B's Trade Balance?

skycricket398

"Assume that Country A and Country B use different floating currencies and trade exclusively with one another. There is a revaluation (appreciation) of Country A's currency against Country B's currency. Assume that just prior to the revaluation, Country A and Country B have a perfect balance of trade, where each country imports the exact same value of goods and services from the other. Holding all else constant, what is the most likely impact of the revaluation of Country A's currency on the balance of trade between the two countries?"

		Country A will develop a trade surplus while Country B will develop a trade deficit.
		Country B will develop a trade surplus while Country A will develop a trade deficit.
		Country A will develop a trade surplus in the short term while Country B will develop a trade surplus in the long term.
		Because a simple change to the value of a currency is not likely to affect the balance of trade between two countries, the two countries will keep a perfect balance of trade.

graymarten520

The answer should be written in dollars and not in quantities.

Question 8

Suppose there are only two countries in the world, Country A and Country B. The following table contains information on each country's demand and supply of some goods.

	Country A	Country B
Demand	Q = 187 - 1P	Q = 137 - 3P
Supply	Q = 3P - 14	Q = 3P - 26

If there is free trade between these two countries, and this is the only good in which these two nations trade, what would be the value of country B's trade balance?

Round your answer to two decimal places. Remember, the trade balance is measured in dollars, not in quantities. If your answer is negative, be sure to include the negative sign.

indigodog288

MGEC62H3 Chapter 2: Chapter 2 Notes

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