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International Trade Assignments Page 1

INTERNATIONAL TRADE

(ECON 1086‐ RMIT, Australia)

(ECON 1269‐ RMIT, Vietnam)

(ECON 1089‐ SIM, Singapore)

Information on ASSIGNMENT 1 PLEASE CHECK RMIT/SIM CANVAS FOR RELEVANT DUE DATE; IT IS UP TO YOU TO FIND THESE OUT. Instructions for submission:

1. Click on Assignments on Canvas. 2. Click on Assignment 1. 3. On the right-hand corner, click on Submit Assignment. 4. Attach your file by clicking on Choose File. 5. Once you selected your file containing your assignment, click on Submit

Assignment at the bottom. To answer the questions 1 and 2, first get the data and follow these steps. Notice that World Bank regularly updates its data, therefore its crucial to obtain all data as soon as possible.

1. Questions 1 and 2 require you to obtain data for Paraguay and Poland. 2. Obtain country-level data on:

I. Imports of goods and services (in current US$) II. Exports of goods and services (in current US$)

III. GDP (in current US$) IV. GDP per capita (in current US$) V. GINI Index (World Bank estimate) from the World Bank’s World

Development Indicators (http://databank.worldbank.org/data/reports.aspx?source=world-development- indicators).

[Note that if your browser (such as Chrome) 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. 4. Pick data ranging from 2001 to 2014. 5. DO NOT attach Excel files to the assignment.

International Trade Assignments Page 2

Assignment 1 (25% of your final grade) Check CANVAS 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 Paraguay and Poland. Explain how you calculated openness, i.e., write down the formula. Using a graph of Openness (as a percentage) versus time, explain in up to 200 words how openness has changed for these countries from 2001 to 2014. Put Paraguay and Poland in the same graph and make sure your graph is properly labelled. (7 marks)

2. Explain in up to 200 words the relationship between Openness and economic development by calculating the correlation coefficient between GDP per capita (proxy for economic development) and Openness for Paraguay and Poland, 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: Corn and Radio. Consumers always spend one-third of their income on Corn and the remainder on Radios. The only factor of production is labour. Each home country worker can produce 2 units of Corn or 3 units of Radios per unit of time, while each foreign worker can produce 2 units of Corn or 4 units of Radios per unit of time. There are 30 workers in Home and 60 workers in Foreign. (a) Which country has an absolute advantage in Radios? In Corn? (2 marks) (b) Which country has a comparative advantage in Radios? In Corn? (2 marks) (c) Draw the typical worker’s budget line in both countries (put Corn on the

vertical axis and Radios on the horizontal axis). (2 marks) (d) Draw the production possibility frontier for each country (put Corn on the

vertical axis and Radios on the horizontal axis). (2 marks) (e) Find the autarky relative price of Radios in both countries (i.e., the price of

Radio divided by the price of Corn). (2 marks) (f) What is the optimal consumption and production for each country under

autarky? (2 marks)

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