Around the World Activity

Chapter 16(27) Open Economy Macroeconomics—Around the World

Read the following articles and pages in order to answer the below questions.

"The Latest and Probably Best Estimate for TPP'", Marginal Revolution
"Despite What Donald Trump Says, Free Trade Benefits Americans", The Huffington Post
"Measuring the Effects of Globalization", Greg Mankiw's Blog

Question

1. Compared to baseline projections, how much do Petri and Plummer predict the Trans-Pacific Partnership will change national income by 2030?

$131 billion

$0.5 trillion

$357 billion

–$357 billion

Question

2. What is a criticism of the Trans-Pacific Partnership offered by Doug Bandow in the Huffington Post article, “Despite What Donald Trump Says, Free Trade Benefits Americans”?

Free trade hurts domestic producers.

The TPP includes provisions that protect sensitive industries and placate powerful interests.

Free trade deals, like NAFTA, only benefit poor countries at the expense of rich ones.

Free trade is responsible for much of American unemployment in the last 10 to 15 years.

Question

3. According to John Goodman of the Goodman Institute, who benefits most from international trade?

those in the top 1% of the income distribution

those in the bottom half of the income distribution

those in the top 10% of the income distribution

those in the middle of the income distribution

Question

4. When trying to measure the effects of open trade on economic growth, what problems does Greg Mankiw point out?

The data needed to assess how growth in countries and free trade policies interact do not exist.

Free trade policies improve GDP, but it is very difficult to assess which individuals benefit the most.

Free trade policies tend to correlate with greater economic growth, but correlation does not prove causality.

Free trade policies are not correlated with greater economic growth.

Question

5. How does David Riccardo’s theory of comparative advantage apply to the discussion of international trade?

Countries with free trade policies can achieve higher production efficiency by specializing in goods and services for which it has an absolute advantage.

Countries with free trade policies can achieve optimal production efficiency by specializing in goods and services for which it has an absolute advantage. Trading is costly to these countries.

Countries that maintain a trade deficit for a long period of time will face decreasing currency values.

Countries with free trade policies can achieve higher production efficiency by specializing in goods and services for which it has a comparative advantage.

Question

6. From the information in the articles, which statement represents the potential effects of open international trade?

International free trade tends to make poor countries poorer and rich countries richer.

International free trade tends to reduce employment permanently

International free trade tends to make poor countries richer, but rich countries poorer.

International free trade tends to benefit countries by increasing GDP.