Questions

1. Using the diagram below explain the output, employment, wage, and income distributional consequences of an increase in migration of labour = L1US - L2US from Mexico to the USA.

DUS = US LABOUR DEMAND CURVE
DMX = MEXICO LABOUR DEMAND CURVE
YLUS = INITIAL USA WAGE
YLMX = INITIAL MEXICO WAGE
OUSLIUS = INITIAL US LABOUR EMPLOYED
OMX LIUS = INITIAL MEXICO LABOUR EMPLOYED

2. In a neoclassical model with diminishing returns and freemobility of both capital and labour, there will be global factor price equalisation. Explain.

3. How does the Stolper-Samuelson theorem relate to the income distribution consequences of international labour migration?

4. What are the costs and benefits of international capital mobility?

5.a. What factors influence the determination of a country'sexchange rate in the short run and in the long run?

b. What are the advantages and disadvantages of fixed and floating exchange rates?

c. How might a country's real exchange rate appreciate even though the nominal exchange rate is pegged?

6. What were the main causes and consequences of the 'Great Depression'?