Question 1

What are the drawbacks of overvaluing the exchange rate as an import substitution policy?

Accepted Answer

not answered

Question 2

Briefly, what are the major causes of export earnings instability for developing countries?

Accepted Answer

Low price and income elasticities of demand leading to erratic movements in export prices.

Question 3

Many developing countries have a static comparative advantage in the production of one or two primary products.In what ways might specialization in these products contribute to growth and development? In what ways might this fail to contribute?

Accepted Answer

Calls for a discussion of short and long run effects as in the text.

Question 4

What are the key ingredients of Taiwan's successful entry into world markets? What lessons can other developing countries draw from Taiwan's experience with global markets?

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Question 5

Taiwan and Jamaica are both islands that have pursued export-oriented development strategies, but Jamaica has experienced increases in unemployment and poverty, while Taiwan has experienced decreases.How might you explain this?

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Question 6

In the North-South model, how are "basic factors" distinguished from "advanced factors," and what are the implications for growth and development possibilities?

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Question 7

Briefly explain the major argument of the factor endowment trade theory.

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Question 8

Provide a concise statement about the relationship between a developing country's emphasis on the export of traditional commodities and:
(a) export earnings stability;
(b) comparative advantage;
(c) terms of trade.

Accepted Answer

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Question 9

Discuss some of the factors that lead infant manufactured goods industries to become more efficient over time, and some of the factors that might lead them to fail to do so.

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Question 10

Evaluate critically the following statement: In light of the experience of the last two decades, free trade is the best trade policy for most developing countries.

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Question 11

State three country characteristics that encourage and three that discourage economic integration among developing countries.

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Question 12

What are the terms of trade? What factors lead them to change over time?

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Question 13

You are a lobbyist hired by a less developed country to try to prevent a developed country from increasing trade barriers against labor-intensive manufactured imports such as textiles.Make your case, arguing from both developed and developing country perspectives, in terms of who gains and who loses.

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Question 14

A country simultaneously raises tariffs on manufactured goods and overvalues the exchange rate.Why might these seemingly contradictory policies be pursued together?

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Question 15

Explain why a country's gains from trade may not accrue to nationals.Indicate the differential effects on GNP and GDP.

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Question 16

(a) Under what circumstances is the effective rate of protection of a tariff greater than the nominal rate?
(b) Why is this a concern for developing countries?

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Question 17

Explain briefly the vent-for-surplus theory of international trade.What is the relevance of this theory to the current development experience of low income economies?

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Question 18

When and under what circumstances is intervention in international trade justified on market correction grounds? What preconditions would have to be met from the government side for there to be a reasonable likelihood of success?

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Question 19

Explain the dynamic rationale for economic integration among developing countries.

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Question 20

After a policy of import substitution has begun, a developing country finds that employment has not risen significantly and that urban unemployment seems to be rising.Explain how these developments might be connected.

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Quiz 12: International Trade Theory and Development Strategy