Solutions Manual to End-of-Chapter Questions
1 Trade in the Global Economy
1. In this question, you are asked to update the numbers for world trade that are shown in Table
1-1.
a. Go to the World Trade Organization’s website at http://www.wto.org, and look for its
trade data under “Documents, data and resources: Publications” for the most recent
edition of its International Trade Statistics. Find the Excel spreadsheet or PDF
document with “Intra– and interregional merchandise trade,” and print out this table.
Intra– and Inter-regional Merchandise Trade, 2011 (Billions of U.S. Dollars)
Destination
Origin
North
America
South
and
Central
America
Europe
CIS*
Africa
East
Asia
World
World
$2,923
$749
$6,881
$530
$538
$5,133
$17,816
North America
1,103
201
382
15
37
476
2,282
South and
Central
America
181
200
138
8
21
169
750
Europe
480
119
4,667
234
199
639
6,612
Commonwealth
of Independent
States (CIS)
43
11
409
154
12
117
789
Africa
102
19
205
2
77
146
594
Middle East
107
10
158
6
38
660
1,251
Asia
906
189
922
110
152
2,926
5,538
Data from: WTO, International Trade Statistics 2012.
b. From this table, what is the total amount of trade within Europe? What percentage of total
world trade is this?
c. What is the total amount of trade (in either direction) between Europe and North
America? Add that to the total trade within Europe, and calculate the percentage of this to
the world total.
d. What is the total amount of trade within the Americas (i.e., between North America,
Central America, South America, and within each of these regions)? What percentage of
total world trade is this?
e. What is the total value of exports from Europe and the Americas, and what percentage of
the world total is this?
f. What is the total value of exports from Asia, and what percentage of the world total is
this?
g. What is the total value of exports from the Middle East and the Commonwealth of
Independent States,12 and what percentage of the world total is this?
h. What is the total value of exports from Africa, and what percentage of the world total is
this?
i. How do your answers to (b) through (h) compare with the shares of worldwide trade
shown in Table 1-1?
2. Explain what each of the following terms means, and describe one example from this chapter
where each of these terms is used.
a. Bilateral trade balance
b. Trade embargo
Answer: A trade embargo involves eliminating trade with a particular country or a group
of countries. For example, Cuba has been completely cut off from trade with the United States
since the embargo was placed in 1961.
c. Free trade area
Answer: A free trade area is a group of countries that do not have any import tariffs
d. Import quota
Answer: An import quota is a type of trade restriction that limits the quantity of a
e. Offshoring
Answer: Offshoring refers to relocating a business process, such as a manufacturing
3. Find online press reports dealing with immigration issues in Europe and in the United States.
Summarize the issues being discussed in each case.
Answer: This is an open question. See below for one example of immigration issues in
Europe and the United States.
Work It Out
The quotation from Federal Reserve Chairman Ben Bernanke at the beginning of the chapter
is from a speech that he delivered in Jackson Hole, Wyoming, on August 25, 2006, titled
a. List three ways in which international trade today does not differ from the trade that
occurred before World War I.
Answer:
i) Physical distance is the same.
b. List three ways in which international trade today does differ from the trade that occurred
before World War I.
Answer: