This article discusses the concepts of foreign portfolio investment, domestic investment, foreign direct investment, and indifference curves. It also explains the production possibility frontier (PPF) and how it can be affected by government investment and immigration.
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International Trade and Investment Policy1 INTERNATIONAL TRADE AND INVESTMENT POLICY Name University Unit Unit code City/State Date
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International Trade and Investment Policy2 International Trade and Investment Policy Q1 a)Foreign portfolio investment b)Domestic investment c)Foreign direct investment d)Foreign portfolio investment Q2 An indifference curve denotes the combination of goods that make a community/ economy or individual consumer equally well off, i.e., they embody the combination of goods which offer a similar level of usefulness to consumers. In our context, a)Yes- the curve denotes the combination of y1 and y2 goods that can make an individual or the community equally well off. The curve is also sloping from right (Lee, 2016). b)No- indifference curves are convex to the origin and not just straight lines (Lee, 2016). c)Yes- higher indifference curves characterizes a higher level of gratification than a lower indifference curve(Kinley, 2016). d)No-indifference curves never intersect (Kinley, 2016). Q3 a)PPT represents all feasible combinations of efficient production units of final goods, given the state of technology and the existing factors of production. In our case we have two goods, that are being produced on an annually basis i.e. rice and cocoa. Nigeria total population is
International Trade and Investment Policy3 130 million people. Thus, Marginal Product of Labour in Nigeria (MPL)- 1 ton of rice or 3 tons of cocoa per year When all 130 million laborers are employed to produce rice and cocoa, home produces 𝐿×𝑀𝑃𝐿_𝑊=130×1=130 million tons of rice and𝑊=130×3=390 millions of cocoa per year. The slope of Nigeria’s PPF is given by - (MPL of rice/ MPL of cocoa) = -1/3 On the other hand, the populationinhabitants of Australia is 24 million people. When all 24 million laborers are employed to produce rice and cocoa, inhabitants of Australia produces 𝐿×𝑀𝑃𝐿_𝑊=24×4=96 million tons of both rice and cocoa per year. The slope of Australia’s PPF is given by - (MPL of rice/ MPL of cocoa) = -4/4=-1 Thus, the possibility production frontiers for Nigeria and Australia can be represented in a PPT as shown below. i)Nigeria’s PPF in million tons per year 130 Rice Cocoa Slope of the cost of foregoing cocoa product is -1/3
International Trade and Investment Policy4 ii)Australia’s PPF in million tons per year b)If the Nigeria government starts a project to improve the productivity of the country say by integrating the production of goods with the technology, the productivity of both goods will increase shifting the PPT of Nigeria to the right depending on the rate of change of MPL or the level of technological adoption in the production of each good. 390 96 96 Cocoa Rice Slope of the cost of foregoing cocoa product is -1
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International Trade and Investment Policy5 This is shown by the graph below c)Nigeria’s PPF falls drastically from its previous position as more workers immigrates. This implies that the Nigerian government is less with capacity to produce rice and cocoa. This affects the balance of payments of Nigeria as its exports reduces drastically due to reduced productivity. 130 390 Rice Cocoa New PPF after government investment in technology/ increased labour employment
International Trade and Investment Policy6 This can be summarized in the graph below. 130 390 Rice Cocoa New PPF after more and more workers relocate to other countries. The productivity shrinks and thus the PPF moves more and closer to the origin
International Trade and Investment Policy7 References List Kinley, D. (2016). Public Policy in International Economic Law: The ICESCR in Trade, Investment and Finance, written by Diane A. Desierto.The Journal of World Investment & Trade, 17(5), pp.861-863. Lee, J. (2016). A Study on the Tariff Policy under International Cooperation in R&D Investment with Spillovers.Korea International Trade Research Institute, 12(2), pp.275-293.