East Asian economies have expanded their proportion of global GDP over the last few decades. Likewise, intra-East Asian trade — that is, trade between East Asian countries – has increased as a share of global trade. Furthermore, East Asian countries are growing their commerce with one another. By using gravity model, explain why.
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East Asian economies have expanded their proportion of global
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- 1. Over the past few decades, East Asian economies have increased their share of world GDP. Similarly, intra-East Asian trade – that is, trade among East Asian nations – has grown as a share of world trade. More than that, East Asian countries do increasing share of their trade with each other. Explain why, using the gravity model.Assume our standard model. In any hour, Andreas can knit 5 scarves or 2 hats. In any hour, Katya can knit 6 scarves or 1 hats. What is the opportunity cost of knitting 100 hats (in terms of number of scarves) for the person with the comparative advantage in scarf production? Note: If neither has a comparative advantage, then we can say that both has a comparative advantage.a. Define the gravity model. Specify the variables utilised. b. Apply the gravity model to India and China. Why has it taken so long for India and China to become serious trading partners? Think of 18th century trade patterns, importation of raw materials back to the UK from their colonies. c. Apply the gravity model to the UK in the year 2021. What countries are most important to the UK’s trade relationships?
- Assume that two countries, A and B, can produce Beef and Barbecues and the production possibilities frontiers of two countries are represented by: Country A: Beef = 30 - 1.25 BBQ and Country B: BBQ = 15 - 0.5 Beef Barbecues are measured in units, beef in kilograms. a) On a single chart, graph the production possibility frontiers for Country A and for Country B. Make sure you use a good scale and mark all your axes and important curves or points. b) Interpret the slope and the shape of the PPF for each country and make the relevant comparisons. c) Assume that each country allocates half of its resources to the production of beef and half of its resources to the production of barbecues. Under autarky (No trade), how much would each country consume of the two products? Plot these points on the graph as Ca and Cb respectively d) Should either of these countries specialize in the production of beef and/or barbecues? If yes, explain which country and which products and why. If they…i Consider the information in the table below. Himma and Därude are two countries that can produce two goods, vinegar (measured in liters) and sugar (measured in kg). The only factor of production is labor. The assumptions of the Ricardo model are satisfied. Unit consumption coefficients: Vinegar Himm 1/6 Därude 1/4 la Outside? Sugar 1/4 1/2 What is the opportunity cost of producing one kg of sugar in Himma and Därude?In the Heckscher-Ohlin model, suppose the two factors of production are: high-skilled labor (H) and regular labor (L). The two sectors are manufacturing and business services. Manufacturing uses regular labor more intensively, and business services uses high-skilled labor more intensively. The two countries are the U.S. and China, and the U.S. has a comparative advantage in business services. a. Illustrate the effect of opening up to trade on the U.S. with the PPF and indifference curve diagram. Make sure you clearly label everything. What happens to the relative price of business services in the U.S.? Show clearly the gains from trade. b. What happens to the relative wage of high-skilled labor? Does inequality (the skill premium) increase? Show all work and explain. 2. Evidence for or against Heckscher-Ohlin model Leontieff Paradox i. Briefly describe the paradoxii.We discussed several explanations for the paradoxical result in class. Briefly describe two explanations. Inequality…
- Use the following expression for the gravity model and the table's hypothetical data to answer the questions below: Y₁ xYj Dij Country T₁: = 0.001 x GDP $20,000 50 km $15,000 $ 200 km What is the predicted volume of trade between Alada and Belam? $ Alada Belam Canson Distance from: Alada Distance from: Belam 50 km 100 km (Enter your response as an integer.)i Consider the information in the table below. Himma and Därude are two countries that can produce two goods, vinegar (measured in liters) and sugar (measured in kg). The only factor of production is labor. The assumptions of the Ricardo model are satisfied. Unit consumption coefficients: Vinegar Himm 1/6 Därude 1/4 lb 1c Sugar 1/4 1/2 Which country has a comparative advantage in the production of sugar? Why? Which country will produce which good given that the relative price of sugar in trade is established at 1.75 (PS). trade is established at 1.75 = 1,75)? PS = PA 1d PS (P₁ = 1)? PA How does your answer change if the relative price of sugar at trade is instead 1Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the events describe below.Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing.a) A relaxation of policies allowing more foreign direct investment into the country.b) Increasing the minimum wage level.c) A decrease in expenditure on research and development.d) An increase in the retirement age.e) Government policies supporting the provision of services, without affecting Manufac
- Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the events describe below.Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing. a) A relaxation of policies allowing more foreign direct investment into the country. b) Increasing the minimum wage level. c) A decrease in expenditure on research and development. d) An increase in the retirement age. e) Government policies supporting the provision of services, without affecting manufacturing.Ireland and Belgium have very similar trading patterns. Both trades considerably more with the United States than with the European Union (EU), even though they are EU members and are closer to the EU common market than the American market. Explain this anomaly using the gravity model.Vega and Sentra are two countries that both produce chicken and vegetables. In Vega each worker in a one-hour period can produce either 9.05 pounds of chicken or 5.76 pounds of vegetables. In Sentra each worker in a one-hour period can produce either 25.49 pounds of chicken or 8.17 pounds of vegetables. Suppose both countries have constant opportunity cost of production and decide to specialize and exchange. The country that specializes in vegetables is willing to sell 19 pounds of vegetables for at least pounds of chicken. Enter a numerical value, rounded to two decimal places.