LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

M.A. DEGREE EXAMINATION – ECONOMICS

RF 32

FIRST SEMESTER – APRIL 2006

                                                EC 1810 – INTERNATIONAL ECONOMICS

 

 

Date & Time : 28-04-2006/1.00-4.00 P.M.   Dept. No.                                                       Max. : 100 Marks

 

 

Part – A

Answer any FIVE questions in about 75 words each.           (5 x 4 = 20 marks)

1. What do the terms of trade measure? Define commodity terms of trade.
2. How is an economic union different from customs union?
3. What are the functions of the IMF?
4. What is a currency board arrangement?
5. Distinguish between flexible and fixed exchange rate.
6. a) If India imports Rs. 60 lacks worth of diamonds and exports Rs. 45 lakhs worth of diamonds in a year, estimate India’s intra-industry trade index for diamonds.
7. b) If India exports Rs. 50 lakhs worth of textiles and imports Rs. 50 lakhs worth of textiles in a year, estimate India’s intra-industry trade index for textiles.
8. The free trade price of an imported Ray Ban sunglasses in India is $100. If it is produced in India it requires $80 worth of imported components. India impose a 40 per cent nominal tariff on each imported Ray Ban sunglass but a 20 per cent nominal tariff on the imported components. Calculate the rate of effective protection for the domestic producers of sunglasses in India.

 

Part – B

 

Answer any FOUR questions in about 300 words each.       (4 x 10 = 40 marks)

8. Compare floating exchange rates with fixed exchange rates.
9. What is meant by SDR’s? Explain the adjustment mechanism under SDR scheme.
10. Discuss the activities of the World Bank.
11. Explain the major achievements of the Uruguay round of trade negotiations under the GATT.
12. Explain the Stolper-Samuelson theorem.
13. Assume that D_x, S_x and P_x = $1 under free trade. Analyse the partial equilibrium effects of an import quota of 30_x if D_x shifts down to in such a way that is parallel to D_x and crosses S_x at P_x = $2.50.
14. Assume the labour productivity for wheat and cloth in the US and UK are as follows:

            Commodity                             US                   UK

Wheat (bushels / man hour)           6                      1

Cloth (yards / man hour)                4                      2

 

Assume the wage rate in the US is $6 per man hour and in the UK its is £1 per man hour. If the exchange rate is £1 = $3 who gains and who loses? At what rate of exchange will there be mutual gain?

Part – C

 

Answer any TWO questions in about 900 words each.         (2 x 20 = 40 marks)

15. State the product cycle theory of trade and explain how overlapping demands between countries could lead to international trade.
16. Explain how capital movements bring about equilibrium in the balance of payments.
17. Discuss Jacob Veiner’s model of trade creation and trade diversion involving a customs union.
18. Examine the Ricardian theory of comparative cost advantage and Haberler’s rehabilitation of this theory.

 

 

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