ut were the pillars of Mercantilist thought? Why was 6. The following table shows the homes of labor required to pro lation of the economy so important? duce 1 unit of each commodity in each country at is meant by the paradox of Mercantilism"? How was reflected in Mercantilist wage and population policies? at are the critical assumptions of the price-specie-flow hanism? What happens to the trade balance in a sur United States country if the demand for traded goods is price inclas United Kingdom Why? CHAPTER 2 EARLY TRADE THEORIES Which country has an absolute advantage in wheat? In cloth will be the United States conception of wheat and ing? Why? If trade takes place between the United States clothing in the trading si By how much has the and the United Kingdom at a barter price of clothing for 2 United States, because of trade, been able to increase its wheat (or 1 wheat for ', clothing, why does each country consumption of wheat and its consumption of clothing? gain from trade? Explain Looking at your answers to this question and to Question 7. (a) Suppose that in the situation in Question 6, the United 7tbl. can you conclude that trade is indeed a positive Kingdom has 500 hours of labor available to it. Prior to sum game? Why or why trade, the country is using 300 of those labor hours 9. China has had an overall trade surplus in recent years. to produce clothing and the remaining 200 labor hours to Economists suggest that this continuing phenomenon is produce wheat. How much wheat and how much cloth due to several things including an inappropriate exchange ing will the United Kingdom be producing in this pre rate. How would a Mercantilist view this surplus? Why trade situation? (Because there is no trade, your answers might Duvid Hume argue that the samples will disappear on will also indicate the amounts of wheat and clothing consumed in the United Kingdom prior to trade.) 10. Suppose that in the context of the price-specie-flow mech- (b) Now suppose that the United Kingdom enters into trade anism, Switzerland currently exports 5.000 units of goods with the United States at the previously indicated bar to Spain, with each exportunit having a price of 100 Swiss ter price of clothing for 2 wheat (or I wheat for francs. Hence, Switzerland's total value of exports to Spain clothing). The United Kingdom now devotes all of its is 500.000 Swiss francs. At the same time, Switzerland labor hours to clothing production and hence produces imports 410,000 frames' worth of goods from Spain, and 125 units of clothing and units of wheat. Why is this thus has a trade surplus with Spain of 90.000 Swiss francs so? Suppose that the country exports 40C (and there (-500,000 francs-410.000 francsl. Because of this trade fore receives 80W in exchange) and keeps the remain surplus, suppose that all prices in Switzerland now rise un ing 85C for its own consumption. What will be the formly by 10 percent, and assume that this rise in price of United Kingdom consumption of wheat and clothing Swiss goods causes its imports from Spain to rise from in the trading situation? By how much has the United their initial level of 410.000 francs to a level of 440.000 Kingdom, because of trade, been able to increase its francs. (For purposes of simplicity, assume that the price consumption of wheat and its consumption of clothing? level in Spain does not change) 8. (a) Continuing with the numerical example in Question 6 Suppose now that the clasticity of demand of Spanish now assume that the United States has 600 hours of labor consumers for Suiss exports is fignoring the negative sign available to it and that, prior to trade, it is using 330 of equal to 20. With the 10 percent rise in the price level in those hours for producing wheat and the remaining 270 Switzerland, the Swiss esport price for each unit of its hours for producing clothing. How much wheat and how exports thus rises to 110 francs. With this information, cal- much clothing will the United States he producing (and culate the resulting change in quantity and the new total therefore consuming) in this pretrade situation? value of Swiss esports. Has the price rise in Switzerland (b) Assume that trade between the United Kingdom and the been sufficient to climinate its trade surplus with Spain? United States takes place as in Question b). With trade Why or why not? Alternatively suppose that the elastic the United States devotes all of its labor hours to wheat ity of demand of Spanish consumers for Swiss exports production and obtains 200 units of wheat. Consistent (again ignoring the negative sign is equal to 02. With the with the United Kingdom's trade in Question 7b). the 10 percent rise in Swiss export prices, what happens to United States then exports 80W and imports 40C. What Switzerland's trade surplus with Spain in this case? ut were the pillars of Mercantilist thought? Why was 6. The following table shows the homes of labor required to pro lation of the economy so important? duce 1 unit of each commodity in each country at is meant by the paradox of Mercantilism"? How was reflected in Mercantilist wage and population policies? at are the critical assumptions of the price-specie-flow hanism? What happens to the trade balance in a sur United States country if the demand for traded goods is price inclas United Kingdom Why? CHAPTER 2 EARLY TRADE THEORIES Which country has an absolute advantage in wheat? In cloth will be the United States conception of wheat and ing? Why? If trade takes place between the United States clothing in the trading si By how much has the and the United Kingdom at a barter price of clothing for 2 United States, because of trade, been able to increase its wheat (or 1 wheat for ', clothing, why does each country consumption of wheat and its consumption of clothing? gain from trade? Explain Looking at your answers to this question and to Question 7. (a) Suppose that in the situation in Question 6, the United 7tbl. can you conclude that trade is indeed a positive Kingdom has 500 hours of labor available to it. Prior to sum game? Why or why trade, the country is using 300 of those labor hours 9. China has had an overall trade surplus in recent years. to produce clothing and the remaining 200 labor hours to Economists suggest that this continuing phenomenon is produce wheat. How much wheat and how much cloth due to several things including an inappropriate exchange ing will the United Kingdom be producing in this pre rate. How would a Mercantilist view this surplus? Why trade situation? (Because there is no trade, your answers might Duvid Hume argue that the samples will disappear on will also indicate the amounts of wheat and clothing consumed in the United Kingdom prior to trade.) 10. Suppose that in the context of the price-specie-flow mech- (b) Now suppose that the United Kingdom enters into trade anism, Switzerland currently exports 5.000 units of goods with the United States at the previously indicated bar to Spain, with each exportunit having a price of 100 Swiss ter price of clothing for 2 wheat (or I wheat for francs. Hence, Switzerland's total value of exports to Spain clothing). The United Kingdom now devotes all of its is 500.000 Swiss francs. At the same time, Switzerland labor hours to clothing production and hence produces imports 410,000 frames' worth of goods from Spain, and 125 units of clothing and units of wheat. Why is this thus has a trade surplus with Spain of 90.000 Swiss francs so? Suppose that the country exports 40C (and there (-500,000 francs-410.000 francsl. Because of this trade fore receives 80W in exchange) and keeps the remain surplus, suppose that all prices in Switzerland now rise un ing 85C for its own consumption. What will be the formly by 10 percent, and assume that this rise in price of United Kingdom consumption of wheat and clothing Swiss goods causes its imports from Spain to rise from in the trading situation? By how much has the United their initial level of 410.000 francs to a level of 440.000 Kingdom, because of trade, been able to increase its francs. (For purposes of simplicity, assume that the price consumption of wheat and its consumption of clothing? level in Spain does not change) 8. (a) Continuing with the numerical example in Question 6 Suppose now that the clasticity of demand of Spanish now assume that the United States has 600 hours of labor consumers for Suiss exports is fignoring the negative sign available to it and that, prior to trade, it is using 330 of equal to 20. With the 10 percent rise in the price level in those hours for producing wheat and the remaining 270 Switzerland, the Swiss esport price for each unit of its hours for producing clothing. How much wheat and how exports thus rises to 110 francs. With this information, cal- much clothing will the United States he producing (and culate the resulting change in quantity and the new total therefore consuming) in this pretrade situation? value of Swiss esports. Has the price rise in Switzerland (b) Assume that trade between the United Kingdom and the been sufficient to climinate its trade surplus with Spain? United States takes place as in Question b). With trade Why or why not? Alternatively suppose that the elastic the United States devotes all of its labor hours to wheat ity of demand of Spanish consumers for Swiss exports production and obtains 200 units of wheat. Consistent (again ignoring the negative sign is equal to 02. With the with the United Kingdom's trade in Question 7b). the 10 percent rise in Swiss export prices, what happens to United States then exports 80W and imports 40C. What Switzerland's trade surplus with Spain in this case