Assignment:
Answer the following questions:
Q.1 We have heard several presentations about actual MNEs. Pick at least one of these and compare and contrast it to at least one of the other companies presented.
Q.2 Production of many "final" goods does not occur in a single location as assumed in the previous questions.
Explain diagrammatically how the cost of production can be seen as the summation of the (rising) cost of producing an intermediate good at the "component" stage plus the (rising) cost of "assembly" to make the final good.
If there is another location where the first stage can undertaken, explain how production of that intermediate good would shift between locations as its cost in the second location rises from an initial level less than or greater than in the first country
Q.3 Explain the nature of a "swap", including its convenience for companies compared with 5. using options. Construct a simple example where a bank can borrow at a cheaper long-run rate than a typical company, and vice versa for short-term rates. Discuss this situation in comparison to Ricardo's theory of comparative advantage!
Q.4 Explain the "Washington consensus", repeatedly upheld by rich countries in dealings with less-developed-countries (LDCs as the way to economic growth.
In particular, this approach implicitly focuses on private-sector investment (through MNEs) as the carrier of the seeds of sustainable progress. However, apart from specific sectors, such as oil, and although health care has improved greatly on a global scale (sustaining a population of around 7 billion or so), incomes at the levels of the DCs are still a distant goal, perhaps even receding.
Discuss the need, even for large MNEs, to rely on other agencies e.g. the IMF, as well as other monitors to assure themselves of stability of would-be developing countries. Assess how well the IMF has doen its job over forty years or so.