Internationa Trade

(ECON 1086‐ RMIT, Australia)
(ECON 1269‐ RMIT, Vietnam)
(ECON 1089‐ SIM, Singapore)
Information on ASSIGNMENT 1
PLEASE CHECK RMIT/SIM BLACBOARD FOR RELEVANT DUE DATE; IT IS
UP TO YOU TO FIND THESE OUT.
Instructions for submission:
1. Click on Assessment tasks on BlackBoard.
2. Click on Assignment 1. It is in red.
3. Scroll down to Assignment Submission.
4. Attach your file by clicking on “Browse My Computer”.
To answer the questions 1 and 2, first get the data and follow these steps.
1. Questions 1 and 2 require you to obtain data from Brazil and El Salvador.
2. Obtain country-level data on imports of goods and services (in current US$),
exports of goods and services (in current US$), GDP at market prices (in current
US$), GDP per capita (in current US$) from the World Bank’s World
Development Indicators
(http://databank.worldbank.org/data/reports.aspx?source=world-developmentindicators).
[Note that if your browser (such as Google) does not open the
webpage, try a different browser (such as Internet Explorer)] 3. For simplicity, use data measured in current US dollars ($) as indicated above. In
addition, for openness calculation, use GDP at market prices (in current US$).
4. Pick data ranging from 1995-2012.
5. DO NOT attach Excel files to the assignment.
International Trade Assignments Page 2
Assignment 1 (25% of your final grade)
Check BLACKBOARD for due dates.
*** Follow the instructions above on how to get the data.
*** Read Chapters 1 and 2 of the textbook very carefully.
1. Calculate openness as a percentage for Brazil and El Salvador. Explain how you
calculated openness. Using a graph of Openness (as a percentage) versus time,
explain in up to 100 words how openness has changed for these countries from
1995 to 2012. Make sure your graph is properly labelled. (7 marks)
2. Explain in up to 100 words the relationship between Openness and economic
development by calculating the correlation coefficient between GDP per capita
(proxy for economic development) and Openness for Brazil and El Salvador,
respectively. [Here you have to use the CORREL command in Excel]. (6 marks)
3. Consider the following model of trade between Home and Foreign. Assume
throughout that those two countries are the only two countries in the world, at
least for purposes of trade. There are two goods: Handbag and Wallet. Consumers
in both countries always spend half of their income on Handbags and half of their
income on Wallets. The only factor of production is labour. Each home country
worker can produce 2 Handbags or 1 Wallet per unit of time. Each foreign
country worker can produce 3 Handbags or 3 Wallets per unit of time. There are
100 workers in Home and 50 workers in Foreign.
(a) Which country has an absolute advantage in Handbag? In Wallet? (2 marks)
(b) Which country has a comparative advantage in Handbag? In Wallet?
(2 marks)
(c) Draw the typical worker’s budget line in both countries (put Handbag on the
vertical axis and Wallet on the horizontal axis). (2 marks)
(d) Draw the production possibility frontier for each country (put Handbag on the
vertical axis and Wallet on the horizontal axis). (2 marks)
(e) Find the autarky relative price of Wallet in both countries (i.e., the price of
Wallet divided by the price of Handbag). (2 marks)
(f) What is the op
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This assignment has 2 short parts to it. Please label them Question 1, and 2 for my easy reference.

QUESTION 1
Below is a response to the question, ‘After watching the video clip from A Knight’s Tale, (https://www.youtube.com/watch?v=vhep2fZKHgE) consider the effect of choosing consumption today versus consumption in the future. Using the PPC (PPC-Production Possibility Curve) as a springboard for your analysis, what effect would forgoing consumption today in order to “invest” for tomorrow have on future production possibilities? Now consider the choices our government faces when it has limited tax revenues to fund the unlimited wants of its citizens. Describe some of the choices the government makes between consumption today and investment for tomorrow.’
Please read the response below and, using a few sentences/1 paragraph, write any comments you would like on the topic question relative to the response:

RESPONSE
In the video clip A Knight’s Tale, the message they are trying to send is the importance of investing today but for the future. The main guy wanted everyone to pitch in so that they could later make an even bigger profit. When you have a plan in advance for what is going to happen in the long run based on investments, you are more likely to follow through and have a better outcome. Forgoing consumption today in order to invest for tomorrow would have a positive effect on future production possibilities. When you know where the investments are going to happen and what the demand trend is going to look like you are able to plan the production in advance to get even bigger results (Investment, n.d.). Government really has to take into consideration whether or not the consumption would have a greater return if they invest for consumption now or invest for future consumption. Because the Government is a part of so many investments, they really have to treat each one as an individual and make the decision based on how it would add the most value and get the biggest result.

QUESTION 2
Below is a response to the question, ‘After watching the video clip from A Knight’s Tale, (https://www.youtube.com/watch?v=vhep2fZKHgE) consider the effect of choosing consumption today versus consumption in the future. Using the PPC (PPC-Production Possibility Curve) as a springboard for your analysis, what effect would forgoing consumption today in order to “invest” for tomorrow have on future production possibilities? Now consider the choices our government faces when it has limited tax revenues to fund the unlimited wants of its citizens. Describe some of the choices the government makes between consumption today and investment for tomorrow.’
Please read the response below and, using a few sentences/1 paragraph, write any comments you would like on the topic question relative to the response:

RESPONSE
After watching the video clip it showed how saving can be very important and allow you to get more later on. The effect of forgoing consumption today in order to invest for tomorrow could be great for future production possibilities. Saving now can allow for so much more to be done in many aspects. Taking the time out to save today for the future could mean that the prices for certain things may drop in the future and you may have a shot at getting something better for a cheaper price. When it comes to the government if they decided to spend now instead of saving for tomorrow the fast spending could slow down the growth of the economy.