Assignment: International Economics

The purpose of this project is for you to prepare a summaryreport on the paper by the Economist magazine.The links to these articles have been posted below. Please let me know if you have any issues accessing them. The paper you prepare should be structured in the following manner:

a. Summarise the main argument or thesis of the report. In effect, a precis. (20%)

b. Discuss in detail how the report incorporates (directly or indirectly) three key theories we have discussed in class. This is designed for you to understand how these theories are evident in practice (40%)
There are the theories in class..

- The Stolper-Samuelson theorem demonstrates how changes in output prices affect the prices of the factors when positive production and zero economic profit are maintained in each industry . It is useful in analyzing the effects on factor income, either when countries move from autarky to free trade or when tariffs or other government regulations are imposed within the context of a H-O model.

- The Heckscher-Ohlin model is a theory in economics explaining that countries export what can be most efficiently and plentifully produced. This model is used to evaluate trade and, more specifically, the equilibrium of trade between two countries that have varying specialties and natural resources. Emphasis is placed on the exportation of goods requiring factors of production that a country has in abundance and the importation of goods that a nation cannot produce as effectively.

- Tariffs are used to restrict imports by increasing the price of goods and services purchased from overseas and making them less attractive to consumers. A specific tariff is levied as a fixed fee based on the type of item, for example, $1,000 on any car. An ad-valorem tariff is levied based on the item's value, for example, 10% of the car's value.

c. What are the implications of the developments mentioned in the articles to the global economy. Here you should present your opinion.

Articles:

1. What will result from America’s strangely timed fiscal stimulus?

2. How to interpret America’s experiment with huge budget deficits?

In terms of addressing implications to business responds, you may discuss business in general, a particular business sector, or an individual company.

You are expected to conduct further research on the issues mentioned in this article. I will be looking for at least 5 article references that must be included in your report. Each section MUST be properly headlined so I can grade these.

The report must be 5 pages - no less, 11 font, 1½ spaced. The length does not include cover page or appendixes and references. The report will be due, in hard copy,no later than at the beginning of class on April 17 or 18th, depending upon what section in which you are registered. Papers will not be accepted after that, so be certain they are printed out in a timely manner, properly bound, and ready to submit at the time I have requested.

If you have any questions, such as clarification or discussion of your points, please feel free to see me. I will be more than happy to assist you and I would strongly advise you so.