...EC312 International Economics Assessment (Q1) Student ID: 0926451 Word Count: 1, 498 The 2008 and subsequent global economic downturns were rooted in lax monetary policies and lack of financial oversight, leading to an aftermath of widening global imbalances, global liquidity abundance and downward pressures on real world interest rates. These resulted from mercantilist trade policies and an unprecedented increase in savings and foreign reserves of emerging economies in Asia. This essay will first explain the Mundell-Fleming (henceforth M-F) model and use it to compare current account deficits under different exchange rate regimes. It will also refer to real-life contexts and discuss limitations of the model. The M-F model portrays the short-run Keynesian relationship between an economy’s key macroeconomic variables. The assumptions and implications of the model are as follows: 1. The economy operates on a perfectly elastic aggregate supply curve. This implies that the level of economic activity, Y, is solely dependent on fluctuations in aggregate demand, as per the IS-LM framework. As prices are fixed, P is normalised to 1 and M represents both real and nominal money stocks. 2. The current account (CA) is determined independently of the capital account. PPP does not hold. CA deficits, as we will later see, depends on Y and the nominal and real exchange rate, e. The higher Y is, the greater the demand for imports; and the lower e is, the more uncompetitive domestic...
Words: 2362 - Pages: 10
...Read the power points posted (chapter 1-2) Chapter 1 Try to answer the study questions in page 26. Answers of these problems will be provided next week; however, you should try your best to answer these problems before check the answers. Try to answer the following multiple choice questions. Answers of these problems will be provided next week; however, you should try your best to answer these problems before check the answers. 1. A primary reason why nations conduct international trade is because: b. Resources are not equally distributed among all trading nations 2. International trade in goods and services is sometimes used as a substitute for all of the following except: d. Domestic production of different goods and services 3. International trade forces domestic firms to become more competitive in terms of: d. All of the above 4. Increased foreign competition tends to: c. Place constraints on the wages of domestic workers 5. International trade in goods and services tends to: d. Increase the amount of competition facing home manufacturers Chapter 2 Try to answer the study questions in page 60. Answers of these problems will be provided next week. Try to answer the following multiple choice questions. Page 64-66 1.Mercantilism: Regulation to ensure a positive trade balance.Critics: possible only for short term; assumes static world economy. Absolute advantage (Adam Smith) Countries benefit from exporting...
Words: 488 - Pages: 2
...middle class acutely vulnerable to the financial storm that swept the globe. In the wake of the Great Recession, a sizable stratum of spent consumers has materialized where an aspirational middle used to be. Overlooked—or just ignored— during the boom preceding the global recession was clear evidence that the position of the middle class in developed markets was increasingly fragile. The New York Times reported in early 2008 that “[t]he European dream is under assault, as the wave of inflation sweeping the globe mixes with this continent’s long-stagnant wages.” A recent report from the UK-based Resolution Foundation Commission on Living Standards documents the failure of wages in developed markets since the mid-1970s to keep pace with economic growth, as shown in Figure 1. Figure 1: Wages as a Percentage of National Income for OECD Countries 60% 55% 50% 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-08 Source: James Plunkett, Growth Without Gain? The Faltering Living Standards of People on Low-to-Middle Incomes, Resolution Foundation Commission on Living Standards, May 2011. 3 Quickening the Pace In the US, as Figure 2 reflects, inflation-adjusted wages...
Words: 12348 - Pages: 50
...International Economics ECO/372 April 25, 2016 International Economics The American Jobs Act was made by the President and Congress, which aim to create jobs as a way of stimulating the economy. Some of the several proposals of the Act are reducing the tax rates on the small businesses, providing assistance to the unemployed, employing more teachers and increase their pay and investing in the infrastructure (Rotemberg, 2013). Furthermore, the President and the Congress have come up with short-term transitory fiscal expansion to generate jobs. Increasing the public investment and increasing the government expenditure will improve the economy. On the other hand, the President and the Congress have increased the tax rates charged on the small businesses to decrease the number of such businesses created and hence the level of employment as a way to contract the economy (Rotemberg, 2013). Also, they lowered the level of government expenditure on infrastructure and projects like roads to minimize the economic development and contractual jobs that attract lots of the younger generation. The Federal Reserve can decrease the interest rates to stimulate economy. By decreasing the interest rate, investors will be encouraged to take loans from banks and invest in the economic activates, which will enhance the economy (CNN Money, 2015). Also, it can contract the economy by decreasing the money supply in the economy. This will increase the interest rate accordingly discourage the investors...
Words: 951 - Pages: 4
...International Economics The German Economy 10th of December 2015 Groupmembers: Con Brunissandre Baitzouroff Pawel Fedko Ha Pham Thai 1 Morenikeji Aina-Badejo Atiwat Hongupathamchai Table of Contents 1. Introduction………………………………………………………………………………..…….. 4 2. The Structure of German Economy…………………………………………………….. 5 2.1 Import, Export and Trading Partners…………………………………………………………….. 5 2.2 Germany’s Main Economic Sector – The Automotive Industry…………………….. 8 3. The Global Financial Crisis and its effects on Germany……………………….. 9 3.1 What are the origins of the 2008 financial crisis?............................................. 9 3.2 The financial crisis plunged Germany in an economic crisis………………………….11 3.3 Government’s Action to Combat Crisis ………………………………………………………. 16 4. Future Challenges and Outlook for Germany…………………………………...19 5. Conclusion……………………………………………………………………………………….21 6. References……………………………………………………………………………………….22 2 Executive Summary This report provides a concise summary of Germany’s main economic features. It starts off by describing the key sectors and trade patterns that make up German economy. From there, it will further examine how one of the strongest economy in the world was affected by the global financial crisis in 2009, and critically analyze the extensive use of policies used by the German government to counter the crisis. The report will conclude by looking at Germany’s long term key challenges and the prospect...
Words: 4926 - Pages: 20
...International Economics 3307AFE Group Assignment | Extend the table 1.3, examine the openness for various countries and analyse the relationship between the openness and the faster long-term growth in standard of living | (Makin, A.J., 2002, p.10) | | | | Sanjeev Henny s2760582 Yu-Ting, Lin s2672341 Yen-Ting, Lee s2768300 World count: 985 | With the increasing globalization of most economies, there is consequently more focus on understanding how international integrations influence macroeconomic performance. Economists use numerous indicators to measure the degree of an economy’s openness. One of the common indicators is the percentage of trade as a share of gross domestic product (GDP). It is the sum of exports and imports of goods and services measured as a share of GDP. (World Bank, 2013). This essay will firstly generally examine the degree of openness for various countries by using the percentage of trade as a share of GDP. It will then outline Singapore as the most open country, Brazil as the least open country and the most rapidly increased openness: Hong Kong. Finally, it will examine whether the degree of openness is correlated with faster long term growth in standard of living. In advanced economies, there are many kinds of methods to analyse an economy’s openness. There has been one commonly used indicator which is the percentage value of the sum of exports plus imports as a share of national product. (Makin, 2009...
Words: 1231 - Pages: 5
...Chapter 1: Introduction 1. Historians of economic thought often describe ___________ written by _______ and published in __________ as the first real exposition of an economic model. A. "Of the Balance of Trade,” David Hume, 1776 B. "Wealth of Nations," David Hume, 1758 C. "Wealth of Nations," Adam Smith, 1758 D. "Wealth of Nations," Adam Smith, 1776 E. "Of the Balance of Trade," David Hume, 1758 Answer: E 2. From 1959 to 2000, A. the U.S. economy roughly tripled in size. B. U.S. imports roughly tripled in size. C. the share of US Trade in the economy roughly tripled in size. D. U.S. Imports roughly tripled as compared to U.S. exports. E. U.S. exports roughly tripled in size. Answer: C 3. The United States is less dependent on trade than most other countries because A. the United States is a relatively large country. B. the United States is a "Superpower.". C. the military power of the United States makes it less dependent on anything. D. the United States invests in many other countries E. many countries invest in the United States. Answer: A 4. Ancient theories of international economics from the 18 th and 19 th Centuries are: A. not relevant to current policy analysis. B. are only of moderate relevance in today's modern international economy. C. are highly relevant in today's modern international economy. D. are the only theories that actually relevant to modern international economy. E. are not well understood by modern mathematically...
Words: 1580 - Pages: 7
...International Economy Global recession is a situation many economists fear could happen if actions today are not implemented. Fixing the economy cannot be done by only addressing one issue as the economy is an intertwinement of different areas combined. A change in one area has effects on others just as not making changes can affect other areas too. Preventive measures in the areas of global productivity, monetary and fiscal policy, and increasing international trade could keep the world from entering this kind of recession. By being proactive citizens of the world the global economy could overcome current conditions. If some of today’s issues are not resolved or addressed the world could face real economic hardships. Increasing Global Productivity by Increasing Employment When one thinks of efficiency in productivity and productivity costs usually coincide with job cuts and lower wages. However, according to Okun’s Law, there is a 1 to 2 ratio when comparing unemployment to loss of real output (Schiller, 2008). This relationship means the more employed individuals a nation has the higher the production possibility can be. The higher number of unemployed individuals the lower the production possibility is. Decreasing unemployment globally will maximize global output. Increases in global output can have beneficial effects on demand and supply, inflation, and the Gross Domestic Production Per Capita for the entire world. Monitoring Monetary and Fiscal Policies Government...
Words: 707 - Pages: 3
...Change The Climate change has always been a big concern regarding to WTO multilateral trading system and climate change. Climate change is the biggest sustainable development challenge the international community has had to tackle to date. Measures to address climate change need to be fully compatible with the international community's wider ambitions for economic growth and human advancement. It is a challenge that transcends borders and requires solutions not only at national levels but at the international level as well. The WTO is one part of the architecture of multilateral cooperation. It provides a framework of disciplines to facilitate global trade and serves as a forum to negotiate further trade openness. Freer trade is not an end in itself; it is tied to crucially important human values and welfare goals captured in the WTO's founding charter, the Marrakesh Agreement. Among these goals are raising standards of living, optimal use of the world's resources in accordance with the objective of sustainable development, and protection and preservation of the environment. The issue of climate change is not part of the WTO's ongoing work program and there are no WTO rules specific to climate change. However, the WTO is relevant because climate change measures and policies intersect with international trade in a number of different ways. First, trade openness can help efforts to mitigate and adapt to climate change, for example by promoting an efficient allocation of the world's resources...
Words: 2979 - Pages: 12
...Contents 1.0 1 INTRODUCTION 1 1.1 BACKGROUND OF GERMANY 1 1.1.0 PEOPLE AND SOCIETY OF GERMANY 1 1.2 INTERNATIONAL TRADE STATUS OF GERMANY 2 2.0 INTERNTIONAL TRADING WITH OTHER COUNTRIES 3 2.1.0 GERMANY’S INTERNATIONAL RELATIONSHIP WITH FRANCE 5 3.0 Data collection and Analysis 6 3.1 Data collection 6 3.2 Analysis 7 3.2.1 IMPORT 7 3.2.2 EXPORT 8 3.2.3 REAL GDP 8 3.2.4 INFLATION 9 3.2.5 UNEMPLOYMENT 10 3.2.6 INTEREST RATE 10 3.2.7 EXCHANGE RATE 11 3.2.8 BALANCE OF PAYMENT 11 4.0 IMPORT AGAINST REAL GDP 12 4.1 IMPORT AGAINST CPI 12 4.2 IMPORT AGAINST UNEMPLOYMENT 13 4.3 IMPORT AGAINST INTEREST RATE 13 4.4 IMPORT AGAINST EXCHANGE RATE 14 4.5 IMPORT AGAINST B.O.P 14 4.6 EXPORT VS REAL GDP 15 4.7 EXPORT VS CPI 15 4.8 EXPORT VS UNEMPLOYMENT 16 4.9 EXPORT VS INTEREST RATE 16 4.10 EXPORT VS EXCHANGE RATE 16 4.11 EXPORT VS B.O.P 17 4.12 IMPORT VS OTHER FACTORS 18 4.13 EXPORT VS OTHER FACTORS 18 5.0 ISSUES AND CHALLENGES OF GERMANY 19 5.1 Exporting German Troubles 19 5.2 Industrial Competitiveness 19 5.3 Paying for Europe 20 6.0 RECOMMENDATION AND CONCLUSION 21 6.1 RECOMMENDATION 21 6.2 CONCLUSION 21 References 22 1.0 INTRODUCTION 1.1 BACKGROUND OF GERMANY Germany which is otherwise called the federal republic of Germany which is additionally the parliamentary republic in the western-focal piece of Europe which comprises of 16 bodies electorate and which has held its predominance. Its capital is Berlin and its landmass covers a zone of 357...
Words: 3875 - Pages: 16
...Global institutions have grown to a new level of prominence in recent history. Global institutions like the IMF and World Bank have provided countries with public goods like stability and the reduction of uncertainty in international markets. As the influence of institutions like the IMF and World Bank grow a large set of critics have pointed out major flaws in the structure and philosophies of these institutions. These criticisms fall into three categories Sovereignty and transparency, Ideology, and Implementation and Adjustment costs. These criticisms call for major reform to the current international financial institutions and call into question whether they provide any benefit to the global economy at all. The first type of criticism is Sovereignty and transparency. Sovereignty criticisms point to the infringement of these institutions policies on the sovereignty of nations. In particular IMF conditionality is of harsh scrutiny as it requires countries to pursue certain macroeconomic policies as a condition of borrowing money from the International Monetary Fund. Countries and their people may not want to use these policies, but they are required by the institution. Nations are no longer in charge of their own policy and this can anger people who favor localize policies for the specific characteristics of certain nations. Transparency is another major criticism of both the IMF and World Bank. Transparency criticisms state that too many o these important decisions are...
Words: 1130 - Pages: 5
...Election year is always a difficult time for those who expect politicians and pundits to remain rational. The political maneuvering started a while ago and clean energy became another point of contention between various political factions. “ONE YEAR AGO TODAY, THE SOLAR MANUFACTURER SOLYNDRA FILED FOR BANKRUPTCY AFTER RECEIVING A $527 MILLION LOAN GUARANTEE. THE BANKRUPTCY SET OFF A POLITICAL FIRESTORM IN CONGRESS, AND EVENTUALLY WORKED ITS WAY INTO THE PRESIDENTIAL CAMPAIGN. TODAY, THE REPUBLICAN PARTY IS USING SOLYNDRA AS A KEY TOOL IN ITS CAMPAIGN AGAINST OBAMA — SMEARING THE ENTIRE CLEAN ENERGY INDUSTRY IN THE PROCESS.” (Lacey, 2012) Campaigns of this magnitude have a significant impact on the international political scene, and economic decisions. Considering that currently China has a very large and inexpensive manufacturing capabilities, as comparing to those in the U.S.; it should not come as a surprise that they can outperform Western (U.S.) manufactures. “PRICES OF SOLAR PANELS HAVE PLUMMETED, CAUSING A SUPPLY GLUT AND SLICING COMPANY REVENUES. SOLYNDRA'S COLLAPSE MARKED THE THIRD TIME IN AS MANY WEEKS THAT A SOLAR COMPANY DECLARED BANKRUPTCY. EVERGREEN SOLAR INC. OF MASSACHUSETTS AND SPECTRAWATT OF NEW YORK ALSO FILED FOR PROTECTION. (Mulkern, 2011). Clean energy is not only appealing to the United States, “THE CHINESE GOVERNMENT IS [also] INVESTING IN SOLAR PRODUCTION, WHICH HAS LED TO A BURST IN PRODUCTION THAT HAS BOOSTED SUPPLIES AND FORCED DOWN PRODUCT PRICES...
Words: 1911 - Pages: 8
...What are the UK’s major exports and imports? Who are the UK’s major trading partners? What trade theories can explain these patterns? In order to understand UK’s position in world trade, what its exports and imports are, and which its major trading partners are, the history of its economy and position in world trade has to be contemplated prior. The structure of the British economy has been transforming through time, in addition to the nation’s trade regarding both its goods and services. Britain was the first industrial nation; this explains the dominion it had in world trade. As this is the case, trade theories help explain the nation’s pattern of trade, considering its offer in knowledge and technology. Since the start of the 1900s Britain was capable to settle its debt on a multilateral basis. For example, UK would resolve part of its large deficit with the USA through the surpluses it earned with “Empire Countries”, such as India, with whom the USA, had deficit. By the Nineteenth century, Britain’s major sources of imports in order of significance were: The United States with cereals, meat and cotton; India with tea and wheat; Australia and South Africa, with wool and meat, and Canada with grain, timber and flour. UK’s trading partners were often countries it had colonial links. Its location in north-western Europe also accounted for some strategic trading partners, which were: France south across the English Channel; the Republic of Ireland west across the Irish...
Words: 1475 - Pages: 6
...International Trade Economics Assignment 1 Question 1 a. Trade in services occur when there is no physical movement which is opposite to trade in goods. Based on case study of South African citizen visiting NZ, the modes of Trade in Services that would result from the transactions and activities of this individual are: mode1. Cross-border when South African citizen purchase a ticket online (IT services), mode2. Consumption abroad which has result after person has moved abroad as tourists to consume the respective services and mode4. Movement of natural persons that has accrued when person have had attended business meeting in NZ. In other words this mode can be described as supplying by nationals of one member in the territory of another, requiring the physical presence of the service provider in the host country or skilled worker using his services in another country. b. Trade between the countries, economic cooperation, expansion of communications, international division of labour bear in itself notable mutual benefits for trading courtiers. The world economy is a result of economic interaction and integration. To penetrate into an essence of economic relations between the different countries, it is necessary to highlight the most common factor that would result in trade. The gravity model, in its basic form, assumes that only size and distance are important for trade in the following way: Tij = A x Yi x Yj /Dij • where Tij is the value of trade...
Words: 2041 - Pages: 9
...Geography and International Economics Oct 18,2012 Question 1 answer： According the theory of external scale economic, it means when abundant companies in the same industry cluster within a small-scale location or specific geographic area, the average cost of their production will decrease, at the same time, the productivity will increase. External scale economic not only reduce the cost, but also force these companies to become more specialization under a competitive environment. Furthermore industry clustering also will attract numerous skilled and unskilled labours, and the transfer of labour in different firms also will promote the whole industry’s technology and knowledge. In addition, clustering helps to promote the development of peripheral industries. When 1898, the first U.S vehicle company Olds has been establish in Detroit. After that, with the development of modern automotive industry, amount of auto companies have been set up there. At the present time, Detroit gradually formed an external scale economic focus mainly on GM, Ford, Chrysler as center, supplemented with peripheral industries, such as auto accessory, auto Research and development. And because of the location of Detroit, which includes the Great Lakes, railways and three international airport terminals, efficient logistic system accelerates the development of external scale economic. In spite of the involve of 2008 economic crisis...
Words: 680 - Pages: 3
