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What is meant by the natural level of income and employment? Why is the long-run aggregate supply curve vertical at the natural level?
Explain how appreciation of a country's currency could affect its aggregate supply curves when imported intermediate inputs are sizable.
If a country finds itself experiencing stagflation under a flexible-rate system, why is expansionary monetary policy unlikely to cure the problem?
What case can be made that flexible exchange rates reduce the flow of long-term foreign direct investment?
Much discussion concerning floating rates stresses the risks to trade and investment involved with such a system. Is risk necessarily a bad thing?
Does a currency board seem to be a useful, practical arrangement for a country? What factors seem critical for a currency board's success?
At the same time, Chile began intervening in foreign exchange markets to stabilize the exchange value. How might these two events be related to each other?
Why are SDRs often referred to as paper gold? What role do they play in the current system?
What were the original purposes of the IMF? Have they changed since Bretton Woods? What is the justification for IMF surveillance?
What combination would the United States consume with trade and complete specialization? What would be the gains from trade?
Which country has absolute advantages and why? What is the situation with respect to comparative advantages?
Comment on this position in view of what you have learned about the distribution of the benefits of trade in the Classical model.
Draw production-possibilities frontiers for countries A and B (on the same graph) that reflect these characteristics, and why you drew them in manner you did.
What do you regard as the main weaknesses of the Ricardian/Classical model as an explanation of trade patterns? Why do you regard them as weaknesses?
Explain why a change in the distribution of income in a country can change the shapes of the community indifference curves for the country.
If the MPPL / MPPK in the production of a good is less than w/r, why is the producer not in producer equilibrium?
What happens to the producer budget or isocost line? What will happen to the equilibrium level of output because of this change in factor prices?
What would be the shape of the production-possibilities frontier, assuming constant returns to scale in both industries?
What should happen to the demand for labor and the demand for capital as this movement takes place? What will happen to relative factor prices?
Explain how producers would respond, using the isocost/isoquant framework. What would happen to the capital/labor ratio in production?
Indicate the equilibrium production and consumption point in autarky, using a PPF and a community. What must occur for this country to gain from trade?
Why is it possible for it to gain from trade if the rate of unemployment remains approximately the same?
What general conditions must hold for one to be able to use community indifference curve to well-being in country and demonstrate gain from international trade?
Ms. Jones, one of your neighbors, spends the majority of her income on food. How would you respond to Ms. Jones?
Discuss several economic events that would increase a country's willingness to trade.