Assignment

I. You have been engaged as an advisor for a developing country. You are asked the following question:

Should the country have a strategy of import substitution or specialization? Explain each of these concepts and the theory of comparative advantage in your answer. Using the theory of comparative advantage come to a conclusion as to which strategy the country should use.

II. Explain what each is and what role each plays in international trade:

a. NAFTA and the EU

b. Climate and the two components of culture

c. Country Risk Assessment and Traditional Hostilities in a country

III. If the exchange rate of the dollar and the Euro goes from one Euro equals $1.22 cents in 2010 to one Euro equals $1.33 in 2011, has the dollar strengthened or weakened and why? If this happens, what is the impact on importers to the U.S. from the EU and on exporters from the U.S. to the EU?

IV. Name and explain the concept of tariff barriers and name and explain one reason countries maintain trade barriers, such as tariffs, and state whether or not this reason is justified and why or why not. What is the impact of these barriers on the efficient allocation of a country's resources? What is the impact on the consumers that purchase the items to which the barriers apply?