Homework
chapter EIGHTEEN
International Trade
ANSWERS TO END-OF-CHAPTER QUESTIONS
18-1 Quantitatively, how important is international trade to the United States relative to other nations? What country is the United States’ most important trading partner, quantitatively? With what country does the United States have the largest current trade deficit? U.S. exports of goods and services are large in absolute terms (second only to Germany in 2003), but only about 10 percent of GDP, which is small relative to the proportion in many other industrialized nations. For example, the percentage is 62 percent in the Netherlands, 25 percent in United Kingdom, 29 percent in New Zealand, and 38 percent in Canada. Canada is the United States’ most important trading partner (In 2004, 24 percent of U.S. exports, 18 percent of U.S. imports). The largest trade deficit is with China, $162 billion in 2004.
18-2 Below are the hypothetical production possibilities tables for New Zealand and Spain. Each country can produce apples and plus. Referring to the tables, answer the following: (a) What is each country’s cost ratio of producing plums and apples. (b) Which nation should specialize in which product? (c) Suppose the optimal product mixes before specialization and trade are alternative B in New Zealand and alternative S in Spain, and the actual terms of trade are 1 plum for 2 apples. What would be gains from specialization and trade?
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|New Zealand’s production possibilities table (millions of bushels) |
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| | | | |
|Product |Production alternatives
International Trade
ANSWERS TO END-OF-CHAPTER QUESTIONS
18-1 Quantitatively, how important is international trade to the United States relative to other nations? What country is the United States’ most important trading partner, quantitatively? With what country does the United States have the largest current trade deficit? U.S. exports of goods and services are large in absolute terms (second only to Germany in 2003), but only about 10 percent of GDP, which is small relative to the proportion in many other industrialized nations. For example, the percentage is 62 percent in the Netherlands, 25 percent in United Kingdom, 29 percent in New Zealand, and 38 percent in Canada. Canada is the United States’ most important trading partner (In 2004, 24 percent of U.S. exports, 18 percent of U.S. imports). The largest trade deficit is with China, $162 billion in 2004.
18-2 Below are the hypothetical production possibilities tables for New Zealand and Spain. Each country can produce apples and plus. Referring to the tables, answer the following: (a) What is each country’s cost ratio of producing plums and apples. (b) Which nation should specialize in which product? (c) Suppose the optimal product mixes before specialization and trade are alternative B in New Zealand and alternative S in Spain, and the actual terms of trade are 1 plum for 2 apples. What would be gains from specialization and trade?
| |
|New Zealand’s production possibilities table (millions of bushels) |
| | | | |
| | | | |
|Product |Production alternatives