(Solution) Assignment on Economics

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Added on 2019-12-18

(Solution) Assignment on Economics

Added on 2019-12-18

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TABLE OF CONTENTSINTRODUCTION...........................................................................................................................31. a) Explain why the beliefs of the Mercantilists were highly criticised...................................3b) Explain the impact of trade in the France and Germany if there is change in the exchangerate by the Ricardian model.........................................................................................................4c) Critically discussion on the significance of the role of comparative advantages of the topthree global traders.......................................................................................................................52. Discussing the Leontief paradox..............................................................................................63. Difference between inter- industry and intra- industry trade...................................................64. Using partial equilibrium model..............................................................................................85. Reasons for why Import Substitution Industrialization policies are a necessary step.............86. Usefulness of FDI in determining the growth and development of less developed countries.9CONCLUSION .............................................................................................................................10REFERENCES..............................................................................................................................112

INTRODUCTIONEconomics is considered as the theories, principles as well as models that are dealingwith how the procedure within the market are working. It makes an attempt to make explanationof the manner in which wealth is being created as well as distributed among the communities.Along with this it includes the manner in which people makes allocation of resources that arescarce and possess several alternative uses as well as other such matters that rises when dealingwith the wants of people and their satisfaction. In other words economics is regarded as thebroader term that is considered scientific study of the action of people specifically as it isassociated to choice of human and use of scarce resources. Economic analysis progresses bymeans of deductive procedure such as mathematics logic in which the implications of particularhuman activities are regarded as means -ends framework. 1. a) Explain why the beliefs of the Mercantilists were highly criticisedUnderstand the economic history that assist to avoid the hinder of recent crises as theycontribute towards the economic growth. The best example of this mercantilists is one of theeconomic system that are mainly establish in the Europe. It is the form that are under theeconomic nationalism as the main goal of this is to empower and enrich the country and alsocontribute in obtaining as well as retaining activities regard to economy within the countriesboarders (Negishi, 2014). Therefore, it will make sure that the country make production toincrease volume and create a variety of sales output as much as possible. It is highly dependsupon the international suppliers and there are mainly three element that critical of themercantilists. Thus, the first and foremost objective of this is to attained through imposed thehigh taxes on the imports of final goods. It also imposing the low taxes on the raw material or theproduct that are exotic (Shishmanova, 2014). Thereafter, the objectives can be achieved bylooking new target market for the manufactured products that are produced domestically as, itwill enhance the demand of those who are produced domestically. Thus, the resultant of thesepolicies is that balance of trade that are positive. The main benefits from the Mercantilists is thatit will help in increasing the employment level of a country and establishment of technology. 3

b) Explain the impact of trade in the France and Germany if there is change in the exchange rateby the Ricardian modelTable1: Exchange rate is 1 Euro =US $1.50, France is 7Euro per hour and USA is $6.00per hour.ClothCheeseButterWheatSugarUSA3036608424France2135284921USA2024405616France31.552.54273.531.57Euro per hourTable2:Exchange rate is 1 Euro =US $1.40, France is 7Euro per hour and USA is $8.00perhour.ClothCheeseButterWheatSugarUSA40488011232France2135284921USA14.285714285717.142857142928.57142857144011.4285714286France29.44939.268.629.4INTERPRETATIONFrom the above table 1 under which there is an exchange rate is 1 Euro =US $1.50 andthe labour rate in France is 7Euro per hour and USA is $6.00per hour. Thus, under this the wagerate per hour of products in the USA of Cloth, Cheese, butter, Wheat and Sugar is $30. $36, $60,$84 and $24 respectively if the rate in USA is $6.00 per hour. Therefore, the wages rate of labourin the France products of Cloth, Cheese, butter, Wheat and Sugar is Euro21, 35, 28, 49 and 21respectively. Thus, the USA and France only export those products across boarder whose priceof product is higher if there is an exchange rate is 1 Euro =US $1.50. It has been analysed thatUSA export wheat as the price of these products that is $56 higher than the all other products. Onthe other hand, France export wheat product that is 73.5 Euro which is higher than the all goodsare the Cloth, Cheese, butter and Sugar. The data table 2 in which there is an increase in the wage rate that is $8.00 due to whichit will change the wager rate per hour of products Cloth, Cheese, butter, Wheat and Sugar that is$40,$48, $80, $112 and $32 respectively. Thus, there is a change in the exchange rate that is14

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