LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
M.A. DEGREE EXAMINATION – ECONOMICS
|
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)
- What do the terms of trade measure? Define commodity terms of trade.
- How is an economic union different from customs union?
- What are the functions of the IMF?
- What is a currency board arrangement?
- Distinguish between flexible and fixed exchange rate.
- 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.
- 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.
- 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)
- Compare floating exchange rates with fixed exchange rates.
- What is meant by SDR’s? Explain the adjustment mechanism under SDR scheme.
- Discuss the activities of the World Bank.
- Explain the major achievements of the Uruguay round of trade negotiations under the GATT.
- Explain the Stolper-Samuelson theorem.
- Assume that Dx, Sx and Px = $1 under free trade. Analyse the partial equilibrium effects of an import quota of 30x if Dx shifts down to in such a way that is parallel to Dx and crosses Sx at Px = $2.50.
- 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)
- State the product cycle theory of trade and explain how overlapping demands between countries could lead to international trade.
- Explain how capital movements bring about equilibrium in the balance of payments.
- Discuss Jacob Veiner’s model of trade creation and trade diversion involving a customs union.
- Examine the Ricardian theory of comparative cost advantage and Haberler’s rehabilitation of this theory.