Problems

11 . Use the demand-and-supply of foreign currency graph to determine what would happen to a small, open economy that experienced capital outflows.

Review Questions

12 . What is the primary way in which economists measure standards of living? 13 . What are some of the other ways of comparing the standard of living in countries around the world? 14 . What are the four other factors that determine the economic standard of living around the world? 15 . What other factors, aside from labor productivity, capital investment, and technology, impact the economic growth of a country? How? 16 . What strategies did the East Asian Tigers employ to stimulate economic growth? 17 . What are the two types of unemployment problems? 18 . In low-income countries, does it make sense to argue that most of the people without long-term jobs are unemployed? 19 . Is inflation likely to be a severe problem for at least some high-income economies in the near future? 20 . Is inflation likely to be a problem for at least some low- and middle-income economies in the near future? 21 . What are the major issues with regard to trade imbalances for the U.S. economy? 22 . What are the major issues with regard to trade imbalances for low- and middle-income countries?

Critical Thinking Questions

23 . Demography can have important economic effects. The United States has an aging population. Explain one economic benefit and one economic cost of an aging population as well as of a population that is very young. 24 . Explain why is it difficult to set aside funds for investment when you are in poverty. 25 . Why do you think it is difficult for high-income countries to achieve high growth rates? 26 . Is it possible to protect workers from losing their jobs without distorting the labor market? 27 . Explain what will happen in a nation that tries to solve a structural unemployment problem using expansionary monetary and fiscal policy. Draw one AD/AS diagram, based on the Keynesian model, for what the nation hopes will happen. Then draw a second AD/AS diagram, based on the neoclassical model, for what is more likely to happen. 28 . Why are inflationary dangers lower in the high-income economies than in low-income and middle- income economies? 29 . Explain why converging economies may present a strong argument for limiting flows of capital but not for limiting trade.

Problems

30 . Retrieve the following data from The World Bank database (http://databank.worldbank.org/data/ home.aspx) for India, Spain, and South Africa for the most recent year available:

• GDP in constant international dollars or PPP
• Population
• GDP per person in constant international dollars
• Mortality rate, infant (per 1,000 live births)
• Health expenditure per capita (current U.S. dollars)
• Life expectancy at birth, total (years)

31 . Prepare a chart that compares India, Spain, and South Africa based on the data you find. Describe the key differences between the countries. Rank these as high-, medium-, and low-income countries, explain what is surprising or expected about this data. 32 . Use the Rule of 72 to estimate how long it will take for India, Spain, and South Africa to double their standards of living. 33 . Using the research skills you have acquired, retrieve the following data from The World Bank database (http://databank.worldbank.org/data/home.aspx) for India, Spain, and South Africa for 2010–2015, if available:

• Telephone lines
• Mobile cellular subscriptions
• Secure Internet servers (per one million people)
• Electricity production (kWh)

Prepare a chart that compares these three countries. Describe the key differences between the countries. 34 . Retrieve the unemployment data from The World Bank database (http://databank.worldbank.org/data/ home.aspx) for India, Spain, and South Africa for 2011-2015. Prepare a chart that compares India, Spain, and South Africa based on the data. Describe the key differences between the countries. Rank these countries as high-, medium-, and low-income countries. Explain what is surprising or expected about this data. How did the Great Recession impact these countries? 35 . Retrieve inflation data from The World Bank data base (http://databank.worldbank.org/data/home.aspx) for India, Spain, and South Africa for 2011–2015. Prepare a chart that compares India, Spain, and South Africa based on the data. Describe the key differences between the countries. Rank these countries as high-, medium-, and low-income. Explain what is surprising or expected about the data.

FIGURE 20.1Apple or Samsung iPhone? While the iPhone is readily recognized as an Apple product, many versions (including recently released offerings) have key components made by rival phone-maker, Samsung. In international trade, there are often “conflicts” like this as each country or company focuses on what it does best. (Credit: modification of “iPhone 4's Retina Display v.s. iPhone 3G” by Yutaka Tsutano/Flickr Creative Commons, CC BY 2.0)

In this chapter, you will learn about:

• Absolute and Comparative Advantage
• What Happens When a Country Has an Absolute Advantage in All Goods
• Intra-industry Trade between Similar Economies
• The Benefits of Reducing Barriers to International Trade

BRING IT HOME Just Whose iPhone Is It? The iPhone is a global product. Apple does not manufacture the iPhone components, nor does it assemble them. The assembly is done by Foxconn Corporation, a Taiwanese company, at its factories in China and India. But, Samsung, the electronics firm and competitor to Apple, actually supplies many of the parts that make up an iPhone. In earlier models, Samsung parts made up as much as 26% of the total costs of production. And in more recent versions, Samsung manufactures the displays and cameras. In some ways, then, Samsung is both the biggest