This document discusses the theory explaining Australia's trade in natural resources with China, the concept of wage equalization in a two-country trade model, and the effectiveness of fiscal and monetary policies in resolving inflation and balance of payment surplus. It also provides recommendations for the preferred policy.
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Runing head: International trade and finance International trade and finance Name of the student Course name Course ID
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1 International trade and finance Table of Contents Question 1: Theory explaining Australia’s trade in natural resources with China? Explain carefully......................................................................................................................................3 Question 2: Taking the context of a two-good and two-country trade model, it is argued that two countries can equalise wage differences by either engaging in international trade in good or allowing labour to freely move between the two countries. Discuss whether this is true or false and explain why.................................................................................................................4 Question 3: Discuss the effectiveness of fiscal and monetary policies in resolving the issue of inflation and balance of payment surplus. Which policy would you recommend and why......4
2 International trade and finance Question 1: Theory explaining Australia’s trade in natural resources with China? Explain carefully Incorporation of strategictrade theory ishaving potentialimpacton the trade relationship among Australia and China while making decision to trade with the natural resources. On the other hand, through the development of this trade decision regarding the natural resources. This is important in the sense that through the use of strategic trade theory, the development of resources is important and countries like Australia and China will be able to identify their comparative advantage, the two countries will be helping in the development of comparative and absolute advantage. Through the incorporation of better development of strategy will induce the country to increase the smoothness of operation. Using the strategy the economy will be able to induce the trade of resources only that will be required for trading. Now trading with china will give Australia enough advantages in the form of better competition and better ground of investment. Being one of the fast developing nations will indulge in the improvement in the economic theory will increase the scope of future opportunities for Australia to increase the development of resources capitalisation and resource mobilisation. On the other hand, it will be beneficial for the development of equipment that will increase the smoothness of operation. Making trade with resources will indulge in the improvement of better accessibility that will no doubt increase the benefit but will also gain enough impact on the development of economy. It will be highly beneficial for Australia to use the mercantilist formula to increase the trade off in obtaining the minerals and other metals from countries like China.
3 International trade and finance Question 2: Taking the context of a two-good and two-country trade model, it is argued that two countries can equalise wage differences by either engaging in international trade in good or allowing labour to freely move between the two countries. Discuss whether this is true or false and explain why Taking the context of two good and two country trade model, it is important for the country to increase the development of the economic activities that will increase the effectiveness of the comparative advantages. The concept of wage equalisation will not be possible through free trade. This is because the modern trade depends entirely on the absolute and comparativeadvantagethatwilldefinitelyincreasethe developmentof resources capitalisation. Free movement of human capital will increase the level of human resources among the two countries in the sense that through the development of equity will indulge the development of better improvement in the economic ground. Question 3: Discuss the effectiveness of fiscal and monetary policies in resolving the issue of inflation and balance of payment surplus. Which policy would you recommend and why In order to increase the efficiency of the economy, the involvement of both fiscal and monetary policy is important. The fiscal policy will be mainly dealing with the development of economic variables in the form of employment, GDP growth. On the other hand, the monetary policy will mainly dealing with the solution of inflation and balance of payments. Now in order to mobilise the development of international trade, the roles played by the balance of payments and inflation rate are crucial in the sense that through the development of resources, it will be willing to indulge the development of resources. Now in order to increase the effectiveness of inflation rate and the balance of payments is going to be influenced heavily by flexible exchange rate. On the other hand, through the development of
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4 International trade and finance better accessibility of flexible exchange rate will allow the external disequilibrium to get fixed automatically by movements in the exchange rate. Use of Maastricht Treaty, 1991, will indulge the monetary unions to get united and they will serve the development of international trade in a better and effective way. Taking the consideration of the trade improvement. On the other hand, through the development of this treaty will increase the resources utilization but will definitely increase the development of economic performances. On the other hand, through the involvement of better monetary policies, the government will be mainly help in identification of resources. Both fiscal policy and monetary policy will be helpful for the development of economic activities.