CFA Level I:Economics - International Trade and Capital Flows 学习要点和习题精选 advantage, absolute, benefits, domestic, economic

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Learning Outcome Statements (LOS)
  

a   Compare gross domestic product and gross national product;
  

b   Describe the benefits and costs of international trade;
  

c   Distinguish between comparative advantage and absolute advantage;
  

d   Explain the Ricardian and Heckscher-Ohlin models of trade and the source(s) of comparative advantage in each model;   
  

e   Compare types of trade and capital restrictions and their economic implications;
        

f    Explain motivations for and advantages of trading blocs, common markets, and economic unions;
  

g   Describe the balance of payments accounts including their components;
  

h   Explain how decisions by consumers, firms, and governments affect the balance of payments;
  

i    Describe functions and objectives of the international organizations that facilitate trade, including the World Bank, the International Monetary Fund, and the World Trade Organization;

Wendy01

4.      Assuming its trading partner does not retaliate, which of the following conditions must hold in order for a large country to increase its national welfare by imposing tariff?

A.  It must have a comparative advantage in the production of the imported good.  

B.  The deadweight loss must be smaller than the benefit of its improving terms of trade.

C.  It must auction the import licenses for a fee to offset the decline in the consumer surplus.

  
    Ans: B; tariffs are taxes that a government levies on imported goods. The primary objective of tariffs is to protect domestic industries that produce the same or similar goods.

In theory it is possible for a large country to increase its welfare by imposing a tariffs if

1.       Its trading partner does not retaliate

2.       The deadweight loss as a result of the tariff is smaller than the benefit of improving its terms of trade.

Wendy01

3.      A small country has a comparative advantage in the production of pencils. The government establishes an export subsidy for pencils to promote economic growth. Which of the following will be the most likely result of the policy?

A.    As new domestic producers enter the pencils market, supply will increase and domestic prices will decline.

B.     The increase in the domestic producer surplus will exceed the sum of the subsidy and the decrease in the domestic consumer surplus.

C.     Although domestic producers will receive a net benefit, the policy will give rise to inefficiencies that cause a deadweight loss to the national welfare.

  
    Ans: C; an export subsidy is a payment by the government to a firm for each unit of a good that is exported. Its goal is to stimulate exports. However, the exporter has the incentive to shift sales from the domestic to the export market, which will increase the producer surplus and decrease the consumer surplus. In total the national welfare decreases.

Wendy01

2.      Consider two countries A and B. Country A is a closed country with a relative abundance of labor and holds a comparative advantage in the production of textiles. Country B has a relative abundance of capital. When the textile trade is opened between the two countries, country A will most likely experience a favorable impact on:   

A.    labor

B.     capital

C.     both labor and capital

  
    Ans: A; country A holds a comparative advantage of labor, so country A will experience a favorable impact on labor.

Wendy01

Exercise Problems:

  

1.      Which of the following statements most accurate? For a country to gain from trade it must have:

A.    an absolute advantage.

B.     a comparative advantage.

C.     economies of scale or lower labor cost.

  
     Ans: B; a country has an absolute advantage in producing a good if it is able to produce the good at a lower cost or use fewer resources in its production than its trading partner.

A country has a comparative advantage in producing a good if its opportunity cost of producing that good is less than that of its trading partner.

A country gain from trade must have a comparative advantage.