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Answers to Even Problems for Thomas Pugel,International Economics Text (14th Edition)TRADE MODULEChapter 1International Economics Is DifferentOverviewThe introduction to the subject of international economics has three major purposes:1. Show that international economics addresses important and interesting current events and issues.2. Show why international economics is special.3. Provide a broad overview of the book.We begin with four controversies that show the importance of current issues addressed by international economics.The first is the rise of international outsourcing (or offshoring) of service activities and jobs from the United States and other industrialized countries to India and other developing countries. Here we introduce the idea that business activities that would be normal and almost unnoticed if they occur within a country can become prominent political issues when they cross national boundaries. A business is always looking for ways to lower costs, and buying inputs from outside suppliers rather than making the inputs itself is one of its standard choices. But buying business services such as telephone call centers and software development from India affects white-collar workers in the industrialized countries. Such a shift can lead to substantial media attention, even though the overall size of the outsourcing is not that large. Even though international outsourcing is just another form of international trade that generally brings national gains overall, political pressures push government officials to do something to defend local jobs. In this case the options for government policies that can reduce the outsourcing are limited, but there have been proposals to prohibit government contracts with private firms if they offshore some of the work.The second is international migration, especially the increasingly vehement complaints about immigrants in many of the major receiving countries. In these countries a rather large (10 percent or more) and rising percentage of the population is foreign-born, including many who are in their new countries illegally. Opponents accuse immigrants of causing general economic harm, imposing fiscal costs as immigrants use government services, and increasing crime. International economics is often about emotional issues like immigration, yet we do our best to use economic analysis to think objectively about actual economic effects. In a preview of the analysis of Chapter 15, we can reach two key conclusions about the effects of immigration on the receiving country. First, as with many issues in international economics, there are both winners and losers in the receiving country. Second, we can determine the net effect on the receiving country. Aswe often conclude when we examine freer international exchange, the net national effect of immigration is positive according to the basic economic model, in this case even if we ignore the gains to the immigrants themselves.The third controversy is the exchange rate value of the Chinese yuan. From the mid-1990s to 2005, the Chinese government maintained a fixed exchange rate of the yuan to the U.S. dollar. As China’s trade surplus increased and the Chinese government continually had to enter the foreign exchange market to buy dollars and sell yuan to keep the exchange rate steady, the United States and the European Union increasingly complained about the fixed rate and urged the Chinese government to allow the yuan to rise in value. In 2005 the Chinese government implemented a small revaluation of the yuan, and then it allowed gradual appreciation of the yuan. Yet, the trade surplus continued to increase into 2007, and foreign complaints grew.In the controversy over China’s exchange rate policy, we can see many of the issues that we will examine in Parts Three and Four of the book, including the measurement and meaning of a country’s balance of payments (including its trade balance), government policies toward the foreign exchange market and how a government defends a fixed exchange rate against market pressure for the exchange rate value to change, foreign financial investments and the role of currency speculators, political pressures that can place limits on how long a country with a fixed exchange rate and a trade surplus can maintain the fixed rate value, and how exchange rates affect not only a country’s trade balance, but also its national macroeconomic performance (including production, employment, and inflation).The fourth controversial development is the rising number and importance of sovereign wealth funds—vehicles for national governments to seek high returns on their foreign financial investments. For some countries that have sovereign wealth funds, the national wealth to invest internationally comes from general intervention in the foreign exchange market (example, China); for other countries the wealth comes from foreign sales of crude oil or other commodities. Controversy arises from the close link of national governments to the foreign investments. A government that has a sovereign wealth fund could alter its national economic policies to make larger financial gains on its investments, or it may use these investments to further its foreign political objectives or other nonfinancial objectives. These concerns have some plausibility, because a national government has the power to make decisions and take actions to pursue its national goals even if other countries view the effects of these decisions and actions as harmfulto their national economies or interests. There is little evidence that anything nefarious has actually occurred as sovereign wealth funds have made their foreign investments. Still, most of these funds are secretive, so the suspicions and controversy stay alive.These four controversies show that international economics addresses important current issues. They also can be used to show why international economics is special—why national boundaries matter in economics. The first reason that international economics is special is that some resources do not move freely between countries. Land is essentially immobile. There are substantial impediments to the movement of labor internationally, as we see in the analysis of international migration, because the personal and economic costs to people of moving from one country to another can be substantial, and because government policies often restrict international movements of labor. Financial capital moves more freely, but there still seems to be a home bias to many people’s financial investments.The second reason that international economics is special is that national government policies matter—in fact, they matter in two ways. One way is that national governments can adopt policies toward international transactions. This is seen in the discussion of political efforts to limit international outsourcing. The other way is that national governments adopt different economic policies. These national policies usually are designed to serve national interests, but they often have international effects. The tension between national interests and international effects is raised in the discussions of China’s exchange rate policy and sovereign wealth funds. Tips for teachingOne good way to begin the first class session is with a look at current events, even before the mechanics and requirements of th e course are presented. The instructor might use the day’s newspaper (for instance, the Financial Times or Wall Street Journal) or the week’s magazine (for instance, the Economist or Business Week) to highlight a few stories related to the content of the c ourse. We have found that this is good way to get the students’ attention and interest. Another good beginning would be to provide a discussion that updates one or more of the four controversies in Chapter 1. For example, the instructor could look at the most recent information on China’s trade balance and the exchange rate value of its yuan.You may want to consider beginning other class sessions of the course (not only the first class session) with a look at one or two stories in that day’s newspaper. The stories should relate in some way to the material covered in the course, but they do have to relate to the specific material covered in that day’s session. We have found that this look at current events reinforces the relevance of international economic analysis. It also encourages students to read a good newspaper or magazine and to keep up with current events. In addition, we can model critical reading, if we both summarize the article’s information and offer our own opinion or analysis (or ask the students for their opinions).The instructor may also point out that there is a lot of information on international issues available on the World Wide Web. Figure A.1 in Appendix A provides a list of some important sites.One issue in teaching is to get student s to “take ownership” of the learning of the material. One good way to accomplish this is to get them to teach some of the material. In doing so they gain greater understanding as well as appreciation for the applicability of what sometimes sound like dry concepts and abstract issues. You may want to consider an assignment like the one that Pugel (and others at New York University) have been using successfully. It asks students working in groups to choose a topic based on current and recent events or developments and prepare and make a brief presentation to the rest of the class, during the second half of the course term. The accompanying pages under the heading “Sample Assignment” show a version of this assignment. It is good to get such an assignment set up early in the term, so that students have enough time to gather information and prepare the talk. One more thought--In evaluating each presentation, you may want to get the students in audience involved by asking each to complete a brief evaluation form for each presentation.Sample assignmentNEW YORK UNIVERSITYPRIVATEStern School of BusinessThe Global EconomyGroup PresentationsEach group will give a presentation to the class from one of the topics listed below. Your presentation is an opportunity to hone your research and presentation skills, to apply concepts from this course (and possibly from other courses), to attack a real issue, and to show off your creativity.A presentation will last no longer than 14 minutes. In addition, you will have 3 minutes for questions from the class. I suggest you plan a talk that fills about 12 or 13 minutes to ensure that you finish within time. Going over the time limit for the presentation will result in a lower evaluation score for “style” and overall assessme nt.For the oral part of the presentation, all group members must be involved in speaking. One aspect of the presentation is the ability to transition from one group member to the next as eachin turn makes part of the presentation.Evaluation will be based on three criteria:Informativeness: How much did we learn from your presentation? Analysis and interpretation: Did you effectively analyze and/or interpret the information that you have on the topic? Did we gain novel insights into the topic? Style: Was your presentation clear and compelling? Were the slides effective? Did you keep within the time limit?Above all, keep your classmates interested. If you use PowerPoint, you should bring your presentation to class on a USB memory stick or CD with the presentation file.Presentation TopicsChoose your topic from the list below. Topics will be allocated on a first-come, first-served basis. If you prefer a topic of your own devising, let me know and we’ll discuss it.Each topic comes with a series of questions. There is some scope to modify the questions, if you think it would lead to a more interesting presentation. Just ask me first.After you know your topic, the group should search for information and start to plan the presentation. After you have an idea of what you will talk about, make an appointment to meet with me. You should come to speak with me at least once before giving your presentation. For many topics you can find much information on the Web. With Web research, it is up to you to verify that a source is credible and accurate.Here are the suggested topics.ASEANThe member countries of ASEAN have committed to forming a true free trade area. What are the goals for this AFTA? How much progress has been made? Why has progress not been faster? Are there important issues that seem to thwart or limit the effort? What will happen over the next five years or so?CAFTAThe United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the Central American Free Trade Agreement in 2004. What are the key features of the agreement? Why did the various national governments push to reach the agreement? Why has ratification and implementation been rather slow? What will happen in the next three to five years?Byrd AmendmentDefine what this U.S. government policy is and how it works. Why did this policy lead to a dispute settlement case in the WTO? What did the WTO decide? What is the current state of the dispute? Should the United States have more forcefully resisted the WTO pressure to change thispolicy?CottonU.S. policies toward cotton have become globally controversial. What are these policies? What effects do they have on the global cotton market? Why have the policies become controversial? How has the WTO been involved in efforts to alter U.S. cotton policies? What is the outlook for the next several years?Russia and the WTORussia has been in negotiations to join the WTO. What is the process for Russia to accede to membership? How far along is the process? What are the major issues that have been resolved, and what major issues still must be resolved? What is your prediction for when Russia will join? Oil PricesCrude oil prices have increased dramatically since the late 1990s. Is this the reemergence of OPEC as an effective cartel? What is the evidence that OPEC has had an impact? What is the evidence that other factors matter? What do you think will happen to oil prices in the next five years?Malaysia: Did Capital Controls Work?Thailand and Malaysia followed different paths during the Asian crisis, with Malaysia imposing capital controls while Thailand maintained capital mobility. Which worked better? Did Malaysia benefit from reducing its “exposure” to international capital flows?EcuadorEcuador dollarized in 2000. Why did the Ecuadorian government choose this policy? In what ways does it seem to have helped the Ecuadorian economy? In what ways has it hurt or caused problems or costs? Do you think that it was a good or bad idea for Ecuador to dollarize? China’s Yuan Exchange RateThe United States and the European Union have been pressing China’s government to alter its exchange rate policy to allow more flexibility, presumably so that the yuan will appreciate by a substantial amount. What has been an d are China’s policies toward the foreign exchange market? From the point of view of China’s government and the well-being of the Chinese economy and people, what are the main reasons for the Chinese government to allow more flexibility and (probably) subs tantial yuan appreciation? What are the main reasons for China’s government to maintain its current exchange rate policy? What do you think will actually happen in the next two to three years?Euro Area ExpansionThe total number of euro-using countries is now fifteen. But that leaves twelve current EU members still using their national currencies. What is the process for gaining approval to adopt the euro? Which of these other twelve EU members will probably adopt the euro in the next five to ten years? Which will probably not? What are the reasons for these differences?Chapter 2The Basic Theory Using Demand and SupplyOverviewThis chapter indicates why we study theories of international trade and presents the basic theory using supply and demand curves. Trade is important to individual consumers, to workers and other factor owners, to firms, and therefore to the whole economy. The new box, “Trade: Increasingly Important,” provides useful data about the types of products traded and the relatively rapid growth of trade.Trade is also contentious, with perpetual battles over government policies toward trade. To understand the controversy, we need to develop theories of why people trade as they do.It is useful to organize the analysis of international trade by contrasting a world of no trade with a world of free trade, leaving analysis of intermediate cases (e.g., non-prohibitive tariffs) for Part Two. The analysis seeks to answer four key questions about international trade:1.Why do countries trade? What determines the pattern of trade?2.How does trade affect production and consumption in each country?3.What are the gains (or losses) for a country as a whole from trading?4.What are the effects of trade on different groups in a country? Are there groups thatgain and other groups that lose?Theories of international trade provide answers to these four questions.Basic demand and supply analysis can be used to provide early answers to these four questions, as well as to introduce concepts that can be used in more elaborate theories. Using motorbikes as an example, the chapter first reviews the basic analysis of both demand (the demand curve and the role of the product’s price, other influences on quantity demanded, movements along the demand curve and shifts in the demand curve, and the price elasticity of demand as a measure of responsiveness) and supply (the supply curve, the role of marginal cost, other influences on quantity supplied, movements along the supply curve and shifts in the supply curve, and the price elasticity of supply). It pays special attention to the meaning and measurement of consumer surplus and producer surplus. This section, which focuses on review and development of basic tools, ends with the picture of market equilibrium in a national market with no trade as the intersection of the domestic demand curve and the domestic supply curve.The remainder of the chapter examines the use of supply and demand curves to analyze international trade. If there are two national markets for a product and no trade between them, it is likely that the product’s price will differ between the two markets. Someone should notice the difference and try to profit by arbitrage between the two markets. If governments permit free trade, then the export supply from the initially low-priced market (the rest of the world in the textbook example) can satisfy the import demand in the initially high-priced market (the United States in the textbook example), and the world shifts to a free-trade equilibrium. We can show this free trade equilibrium by deriving the supply-of-exports curve for the rest of the world and the demand-for-imports curve for the United States. The international market for the product clears at the intersection of the export-supply and import-demand curves, indicating the equilibrium international or world price and the quantity traded. This equilibrium world price also becomes the domestic price in each country with free trade.The same set of three graphs (the two national markets and the international-trade market) is used to show the effects of the shift from no-trade to free-trade on different groups in each country and to show the net gains from trade for each nation. In the importing country consumers of the product gain consumer surplus and producers of the product lose producer surplus. Using the one-dollar, one-vote metric, the country as a whole gains, because the gain in consumer surplus is larger than the loss of producer surplus. In the exporting country producers of the product gain producer surplus and consumers of the product lose consumer surplus. The analysis shows that the country as a whole gains because the gain in producer surplus is larger than the loss of consumer surplus. Furthermore, the country that gains more from the shift to free trade is the country whose price changes more—the country with the less elastic trade curve (import demand or export supply).TipsWe believe that this chapter is an excellent way to introduce the analysis of trade. The four questions about trade focus student attention on key issues that are interesting to most of them. Students then get a quick payoff through the use of the familiar supply-demand framework. By the end of this short chapter we have preliminary answers to all four trade questions. We have also laid a solid foundation for the analysis of trade using supply and demand curves, the approach that will receive the most attention in Part Two on trade policies.In class presentations it may be useful to show the graphs in a sequence, perhaps using a series of slides. After presenting the review of demand and supply and the national market equilibrium with no trade, the following sequence works well.1.Two national market graphs with no trade, one with a high no-trade price (the United States),and one with a low no-trade price (the rest of the world, or ROW). Question to the class: “If you were the first person to notice this situation, could you make a profit?” This is a goodway to motivate international trade driven by arbitrage.The U.S. national market graph and the international market graph. Question to the class: “Let’s say that the United States is willing to open up to free trade and integrate into the world market. If it does this, the world price will also be the price within the United States. How much will the United States want to import?” It depends on what the world price is. The instructor can pick one or twohypothetical world price(s) (below the no-trade U.S. price), and measure the gap between domestic quantity demanded and domestic quantity supplied. This is the U.S. demand for imports, and these import quantity-price combinations can be used to plot the U.S. demand-for-imports curve in the international market.2. A graph of the international market and the ROW national market. A comparable discussionto item 2 above, to derive the supply-of-exports curve.3.Superimpose the graphs from item 2 on the graphs from item 3. Question to the class: “Whatwill happen with free trade? When there is ongoing free trade, what is the equilibrium world price?” This set of three graphs can be used to show the free-trade equilibrium: world price, quantity traded, and quantities produced and consumed in each country.4. A single graph showing the U.S. national market, to contrast no trade with free trade.Questions to the class: “What group is made happier by the shift from no trade to free trade?What group is a loser? Can we somehow say that the country gains from free trade?”5. A single graph showing the ROW national market, with the same questions in item 5. Subsequent chapters in Part I present additional theories of trade. The figure shown on the accompanying page provides a summary of the key features of these theories. It may be useful to copy and distribute this figure to your students. If it is distributed when the class begins to study the material, it can serve as a roadmap. If it is distributed when the class finishes the lectures on the material, it can serve as a summary and review.For instructors who want to begin with the discussion of absolute and comparative advantage rather than with the supply-and-demand framework that focuses on a single product, this should be possible. After covering the introductory material (the first two pages of Chapter 2, and, possibly, the box “Trade: Increasingly Important”), the course would skip to Chapter 3. The remaining material from Chapter 2 on the supply and demand analysis can be inserted right after Chapter 4’s section referring to analysis using supply and demand curves, or this material can be presented as a separate topic elsewhere in the course.Suggested answers to questions and problems(in the textbook)2. Producer surplus is the net gain to producers from being able to sell a product through amarket. It is the difference between the lowest price at which some producer is willing to supply each unit of the product and the actual market price that is paid, summed over all units that are produced and sold. The lowest price at which someone is willing to supply the unit just covers the extra (marginal) cost of producing that unit. To measure producer surplus for a product using real world data, three major pieces of information are needed. First, the market price. Second, the quantity supplied. Third, some information about the slope (or shape) of the supply curve. How would quantity supplied change if the market price decreased? Or, what are the extra costs of producing each unit up to the actualquantity supplied? Producer surplus could then be measured as the area below the market price line and above the supply curve.4. The country's demand for imports is the amount by which the country's domestic quantitydemanded exceeds the country's domestic quantity supplied. The demand-for-imports curve is derived by finding the difference between domestic quantity demanded anddomestic quantity supplied, for each possible market price for which quantity demanded exceeds quantity supplied. The demand-for-imports curve shows the quantity that the country would want to import for each possible international market price.6.If there were no exports of scrap iron and steel, the domestic market would clear at the price at which domestic quantity demanded equals domestic quantity supplied. But the United States does export scrap iron and steel. The extra demand from foreign buyers increases the market price of scrap iron and steel. Domestic users of scrap iron and steel pay a higher price than they would if there were no exports. Thus, some support aprohibition on these exports, in order to lower the market price of the scrap that they buy. 8. a. With free trade at $67 per barrel:Domestic production Q S : 67 = 0.5 + 35Q S , or Q s = 1.9 billion barrels.Domestic consumption Q D : 67 = 291 - 40Q D , or Q D = 5.6 billion barrels.b. With no imports, domestic quantity supplied must equal domestic quantity demanded Price ($/barrel) 67 1.9 5.6 Quantity (billions of barrels) S US D US(both equal to Q N ) at the domestic equilibrium price P N :291 - 40Q N = 0.5 + 35Q N , or Q N = 3.87 billion barrels produced and consumed.Using one of the equations, we can calculate that the domestic price would be about $136 per barrel.c. Domestic producers of oil would gain, receiving an increase of producer surplus shownas area o in the graph. Domestic consumers of oil would lose, experiencing a loss of consumer surplus shown as area o + i + l in the graph.10. The supply curve S US shifts down (or to the right). The U.S. demand-for-imports curveD m shifts to the left (or down). The equilibrium international price decreases below 1,000—it is shown by the intersection of the new U.S. D m curve and the original S x curve.12. a. In the graphs below, the free trade equilibrium price is P F , the price at which the quantityof exports supplied by Country I equals the quantity of imports demanded by Country II. (The quantity-of-imports demanded curve for country II is the same as the country's regular demand curve.) This world price is above the no-trade price in country I. The quantity traded with free trade is Q T .Price ($/barrel) 136 1.9 3.87 5.6 Quantity(billions of barrels)S US o i l D US 67P P P T T T。
题型：（范围2—8章）1填空：5题10分2选择：10题20分3判断：10题10分4简答：2题10分5计算：4题40分6论述：1题10分第二章 Payments among Nations 国际收支1.Accounting principles 记账原则A credit item (+)positive items: a country must be paid; payment by a foreigner into the country.包括：Exports of goodsPurchases by foreigners in this countryForeigners’ investing in the country’s bondsA debit item (-)negative items： a country must pay; payment by the country to a foreigner.包括：Imports of goodsPurchases by firms in this country from foreign countriesPurchases by investors in this country from foreigners2．Balance of Payments Statement国际收支平衡◆Current account（经常账户）:简CA（商品、服务的进出口、对外国金融资产的支付和收益、单方面转移）◆Financial account（金融账户）:简FA (直接投资、国际证券投资)◆Official international reserves（官方国际储备）:简OR（黄金、外汇资产、在国际货币基金的特别提款权）◆三个国际收支部分，根据Each transaction has two item, one positive and one negative, of equal value.—double-entry bookkeeping复式记账法有：positive items + negative items = 0positive balance: surplusnegative balance: deficit（1）Current account balance经常账户差额经常账户差额(CA) = 商品贸易差额 + 劳务差额加上收入净额 + 无偿转移收支净额之和。
