Archives: Solution Manual

1 (12) The Global Macroeconomy 1. Discovering Data In this problem you will use data from the Bureau of Economic Analysis (BEA) to investigate the dependence of the United States on foreign markets over time. Go to the BEA website […]

12 The Global Macroeconomy Notes to the Instructor Chapter Summary This chapter provides students with a broad overview of international macroeconomics. The chapter uses several key concepts to introduce the subject to students without formal modeling. At the end of […]

11 International Agreements: Trade, Labor, and the Environment 1. In Application: The Trans–Pacific Partnership, we summarized some of the provisions of TPP and the views of consumer and environmental groups. The text of the TPP agreement is available at: https://ustr.gov/tpp/#text. […]

11 (22) Topics in International Macroeconomics 1. (PPP) Richland and Poorland each have two industries: traded TVs and nontraded house maintenance. The world price of TVs is R$100 (R$ = Richland dollar). Assume for now that the exchange rate is […]

37 positive consumption externality from the installation of solar panels since this source of In fact, when China subsidizes panels and exports them to the United States and Europe at below cost, the social gains are even greater. Yet, both […]

21 Suppose a tariff in the amount of t dollars is applied on all importers before NAFTA. Then the United States imports Q1 units of auto parts at a price of PAsia + t given by point A, where the […]

11 International Agreements: Trade, Labor, and the Environment Notes to Instructor Chapter Summary This chapter shows that without international agreements, countries have a strong incentive to choose policies that could result in the prisoner’s dilemma. Namely, a country would impose […]

Teaching Tip 3: The break-even condition for lenders (the equation following Figure 22- 10) implies a value of the lending rate. Solving for rL, we get rL = (1 + r − p)/p = [(1 + r)/p] − 1 The […]

loan demand. An increase in volatility of output leads to an increase in the lending rate and an ambiguous effect on the amount borrowed. APPLICATION The Costs of Default This application considers empirical measures of the costs of default from […]

hold. Changes in the nominal exchange rate reflect: 2 Exchange Rates in the Short Run: Deviations from Uncovered Interest Parity The UIP condition relies on arbitrage to ensure that the expected return on foreign deposits equals the return on domestic […]

22 Topics in International Macroeconomics Notes to Instructor Chapter Summary This chapter covers extensions to the models presented in earlier chapters. There are four topics covered: ■ purchasing power parity (PPP), especially the issue of why price levels are higher […]

10 Export Policies in Resource–Based and High–Technology Industries 1. In Figure 10-8 we showed the value of Chinese exports of rare earth minerals, along with their average price and quantity sold, in three categories of exports. The source for the […]

10 (21) The Euro 1. Discovering Data Do some research on the Internet to construct an updated version of the map in Figure 21-1. You can find membership information on the websites of the European Union (europa.eu) and the European […]

41 expectation that these costs will be repaid at the government rate. Indirect subsidies to the This agreement lowered subsidies from estimates of 7.5% to 12% of the cost of production and resulted in an increase in the price of […]

21 A government-applied tariff results in a price of − , as shown in Figure 10-6, causing the export supply curve in panel (b) to shift upward by the amount of the tariff from X to X + , resulting […]

1 10 Export Subsidies in Agriculture and High-Technology Industries Notes to Instructor Chapter Summary The trade policies we examine in this chapter are those that promote exports, often at the expense of consumers and import nations dependent on the product. […]

b. Suppose that based on the OCA, Country A and Country B join the CU but Country C does not. Illustrate the OCA line on your diagram based on this information. Answer: See the previous diagram. Country A and Country […]

The ECB’s key characteristics are as follows: ■ Instruments and goals: ● Instrument: Interbank lending rate ● Goals: * Primary: “Maintain price stability” * Secondary: “Support the general economic policies in the Community with a view to contributing the achievement […]

21 The Euro Notes to the Instructor Chapter Summary This chapter examines the theory of optimum currency areas, focusing on the Eurozone or Euro area. The chapter provides a historical background on Europe to better understand the euro’s origins. It […]

9 Import Tariffs and Quotas Under Imperfect Competition 1. Figures A, B, and C are taken from a paper by Chad Bown: “The Pattern of Anti dumping and Other Types of Contingent Protection” (World Bank, PREM Notes No. 144, October […]

an exporter is dumping potatoes in the economy. Given the following scenarios, rank each from best to worst in terms of the importing country’s welfare. Explain. i. Free trade ii, Foreign dumping iii. Foreign dumping with an antidumping duty iv. […]

effective price of computing power fell rapidly in the United States between 1982 and 1988. Brazil, however, did not achieve the same low prices as the United States during Consumer and Producer Surplus The effect of the tariff protection on […]

Numerical Example of Dumping To understand why it is profitable for the Foreign firm to export the good at below- average cost, we use the following hypothetical information pertaining to its costs and demand. Fixed costs = $100 Marginal costs […]

8 Import Tariffs and Quotas Under Perfect Competition 1. At the opening of this chapter, we referred to the events of May 1995, when the United States considered putting tariffs on imports of luxury cars from Japan. Specifically, on May […]

Growth in Exports from China Figure 8-12 compares the changes in clothing and textiles exports with the United States following the elimination of the MFA. Panel (a) shows that in 2005, China’s textile and apparel exports to the United States […]

States and occurs in addition to the deadweight loss of area +. 4 Import Tariffs for a Large Country We now understand that for small countries, which take world prices as given, tariffs create deadweight losses for them and these […]

7 Offshoring of Goods and Services 1. What type of occupation would you like to pursue after graduation? To see what is available, to the Bureau of Labor Statistics website at: https://www.bls.gov/ooh/. a. Find four occupations that you think fit […]

36 4 Conclusion In this chapter, we focused on a different type of trade than in previous chapters. Here, we looked at the intermediate products used in production— not trade in final goods and services. The Ricardian and Heckscher‒Ohlin models […]

21 jobs—the mid–level wage jobs. This means that low– and mid-level wage categories were impacted with lower employment in the 1980s, while in the 1990s, the mid–level wage workers were more heavily impacted. This reflects a trend toward greater loss […]

7 Offshoring of Goods and Services Notes to Instructor Chapter Summary Up to this point, we have focused on the trade of final goods and services—consumer goods. But, a significant amount of trade involves intermediate goods and services or inputs […]

6 Increasing Returns to Scale and Monopolistic Competition 1. a. Of two products, rice and paintings, which product do you expect to have a higher index of intra-industry trade? Why? b. Access the U.S. TradeStates Express website at http://tse.export.gov/tse/tsehome.aspx. Click […]

rose over 20% relative to the level in 1994. In both sectors, real wages increased by 2003 to the levels reached in 1994. As an alternative to examining real wages, we could instead study the real monthly income, which would […]

1 6 Increasing Returns to Scale and Imperfect Competition Notes to Instructor Chapter Summary In the Ricardian and modified specific-factors model as well as in the Heckscher–Ohlin model, we assumed perfectly competitive markets, where there are many firms, each producing […]

5 Movement of Labor and Capital Between Countries 1. Under Headlines: Brussels Resumes Policy Push to Share out Refugees across EU, there is a map showing persons seeking asylum in the European Union, as of May 2015. In this question, […]

41 World Gains from Migration The sum of triangles ABC and A*BC representing Home and Foreign gains, respectively, gives the larger triangle A*AB, which denotes the increase in the world gross domestic product (GDP) due to immigration. For example, when […]

21 Rybczynski theorem: In the Heckscher‒Ohlin model with two goods and two factors, an increase in the amount of a factor found in an economy will increase the output of the industry using that factor intensively, and decrease the output […]

1 5 Movement of Labor and Capital Between Countries Notes to Instructor Chapter Summary The objective of this chapter is to consider the effect on earnings from the factors of production and output from movement of all the factors of […]

4 Trade and Resources: The Heckscher–Ohlin Model 1. In this problem you will learn how to download data for U.S. export and imports for highly disaggregated products. Supposes that you are hired by a company that wants to start exporting […]

APPLICATION Opinions Toward Free Trade Workers’ attitudes toward limitations on free trade depend on whether we are in the short run or long run. More specifically, assuming that workers earn a portion of the rental on the specific factor in […]

4 Trade and Resources: The Heckscher–Ohlin Model Notes to Instructor Chapter Summary This chapter presents the Heckscher–Ohlin model with two factors (capital and labor), two goods (computers and shoes), and two countries (Home and Foreign). A test of the model […]

3 Gains and Losses from Trade in the Specific–Factors Model 1. In the chapter, we learned that workers displaced by import competition are eligible for compensation through the Trade Adjustment Assistance program. Firms are also eligible for support through Trade […]

12 Substituting the information above gives ∆  =((10%)· 100)−((5%) · 60) 40 =17.5% We see that the percentage increase in the rental on capital, 17.5%, is far greater than the percentage increase in the relative price of manufacturing, 10%. […]

2 Trade and Technology: The Ricardian Model 1. In this problem you will use the World Development Indicators (WDI) database from the World Bank to compute the comparative advantage of two countries in the major sectors of gross domestic product […]

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 […]

the steamship and railroad expansion, all of which encouraged trade. This golden age that lasted up until 1920 experienced large increases in trade and globalization. In fact, the Inter-War Period Because of World War I and its aftermath, the trade–to–GDP […]

1159 *11–36. Determine the angle for equilibrium and investigate the stability at this position. The bars each have a mass of 3 kg and the suspended block Dhas a mass of 7 kg. Cord DC has a total length of […]

1143 *11–20. The crankshaft is subjected to a torque of Determine the horizontal compressive force Fapplied to the piston for equilibrium when u=60°. M=50 N #m. SOLUTION For Ans. Ans.F=512 N (–50 +0.09769F)du =0 dx=-0.09769 du u=60°, x=0.4405 m dU=0; […]

1123 11–1. SOLUTION Free Body Diagram: The tension in cable AC can be determined by releasing cable AC .The system has only one degree of freedom defined by the independent coordinate .When undergoes a positive displacement ,only FAC and the […]

1107 10–94. SOLUTION Differential Element:The mass of the disk element shown shaded in Fig. ais .Here,.Thus,. The mass moment of inertia of this element about the yaxis is . dIy= 1 2dmr2= 1 2 A rpr2dy B r2= rp 2r4dy […]

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