USC Dana and David Dornsife College of Letters, Arts and ...



IR 213: Spring 2017Midterm Study GuideUpdated Feb 16, 2017 This is your midterm study guide. All key terms and questions on the exam will come from this study guide or will closely match a question from one of the first two homework assignments.Note: I will post this study guide with two lectures still remaining before the exam. Thus, there are a few terms/questions you won’t have the material to answer until the Wednesday before the exam.The midterm exam will include 4-6 key terms, for which you will be asked to define the term, state its significance, and give an example. The terms on the exam will be drawn from this study guide. Terms not on these lists will not be on the exam. Definition: 1 sentence. Self-explanatory. Make sure this is sufficiently detailed to distinguish the term from other similar terms on the list. Significance: How does this term relate to the core material we are covering? i.e. how does trade create wealth, how are the gains from trade distributed, who wins and who loses from trade openness, etc. It is also correct to relate this term to similar terms, or opposite terms covered in the course.Example: Give me an example of the term. This does not need to come from lecture or the book, but those are the easiest place to look for examples. There is no specific example we are looking for – any appropriate example will be considered correct. Sample correct exam answer:Term: AutarkyDefinition: The complete absence of trade.Significance: Autarkic states do not engage in any international trade, and therefore cannot exploit comparative advantage or reap the gains from trade. Example: North Korea, in addition to being communist, also does not permit trade of most products, making their economy almost entirely autarkic.There will also be 2-3 mini-essay questions requiring answers of 3-4 sentences and 5-6 short answer questions. As with the key terms, I will only ask questions that come directly off of the study guide. Sample correct exam answer:Short-Answer Question: According to the factor-endowment model, if a country is labor-abundant and capital-scare and land-scarce, who in that country benefits from free trade?Answer: Unskilled workers (i.e. owners of labor)Note: On exam day, bring your bluebook, several pens/pencils, and not much else. Everything except writing instruments and bluebooks will need to be placed down at the front of the class. This includes bags, books, etc. and especially PHONES. No phones at your seat, so if you have a fancy smartphone, you might want to leave it at home, along with your laptop and other valuables. No trick questions. No surprises. Good Luck!NOTE: QUESTIONS THAT ARE IN ITALICS ARE OVER MATERIAL I HAVE NOT COVERED BY THE TIME THE STUDY GUIDE WAS PUBLISHED BUT THAT I WILL COVER BEFORE THE EXAMKey TermsComplementSubstituteAutarkyMercantilismAbsolute AdvantageComparative AdvantageOpportunity CostFactor of ProductionCommoditiesTerms of TradeMarginal Rate of TransformationRace to the BottomImportance of Being UnimportantLaw of One PriceArbitrageMost Favored NationDumpingCountervailing dutiesSmoot-Hawley Tariff (no example needed)Beggar-Thy-NeighborNormal GoodInferior GoodConcentrated vs. Diffuse InterestsSocial DumpingDependency TheoryImport-Substituting IndustrializationExport-Oriented IndustrializationWashington ConsensusTrade adjustment assistanceNeocolonialismSpecializationContainerization (No example needed)Short Answer Questions:Any questions from the homework are also fair game for the midterm. I will change the questions slightly, but if you’re comfortable with the homework questions, you’ll be fine on the midterm. In particular, be ready to describe the effects of tariffs, quotas, or subsidies on domestic consumption, domestic production, prices, and imports. I guarantee a set of questions on this topic. 1. Name two things that would cause the demand curve for apples to shift (specify the cause and the direction of the shift). *Note: I may ask this question about supply curves or demand curves for any product. 2. Name two things that would cause the quantity of apples demanded to shift (specify the cause and direction of the shift).*Note: I may ask this question about quantity supplied or quantity demanded for any product. 3. For each of the following groups, who wins and who loses from a tariff on the import of lumber from Canada to the US? (Note: I may ask a question like this about any product).A. An owner of timberland in CanadaB. An owner of timberland in the USC. Loggers in CanadaD. Loggers in the USE. Furniture manufacturers in the USF. Consumers in the US G. Manufacturers of faux-wood flooring in the US4. What type of countries tend to export commodities, poor countries or rich countries? What is the problem with being economically dependent on commodity exports?6. Who loses from the imposition of a subsidy? Who loses from the imposition of a tariff? 7. List one benefit and one cost for each of the following strategies:Total trade openness Subsidizing/protecting key industriesBig government safety net 8. What was the purpose of the GATT?9. Who supported the corn laws in Britain? Who opposed them?10. In 2016, what type of products have higher tariffs globally, agricultural products or manufactured goods? 11. Did global tariff levels increase or decrease during the great depression? Did this increase or decrease the severity of the great depression? 12. Why did tariffs and subsidies NOT increase dramatically during/following the global financial crisis?13. List three factors that contributed to the first wave of globalization (1870-1914)14. Why do former colonies where colonists were more likely to live themselves have better political institutions (e.g. court systems, bureaucracies) than former colonies where very few colonists actually settled? 15. List two policies associated with the Washington Consensus. 16. Global trade as a share of global GDP increased steadily and dramatically throughout the second half of the 20th century. What is the current state of global trade growth since 2011?Mini-Essay Questions:1. Why do rich countries that are more open to trade tend to have larger welfare states (i.e. more government spending) than rich countries that are more closed to trade? 2. Why does volatility have more negative effects on poor countries (and poor individuals) than on rich countries (and rich individuals)?3. Sometimes countries pass laws requiring imported goods to meet certain environmental or labor standards in order to be imported. Sometimes they do this because they want to protect foreign workers and the environment. Why else might a country do this? 4. How do political institutions determine the areas in which a country enjoys comparative advantage (i.e. in both the long run and the short run, how to political institutions cause a country to be efficient or inefficient in producing certain types of goods)? 5. What are the key factors that prevent an agreement in the Doha round of trade negotiations? What do developing countries want? What do rich countries want? 6. Please address the following three questions in 1-2 sentences each. How do agricultural subsidies in the US affect American consumers and taxpayers? How do they affect farmers in developing countries? Why does the US continue to subsidize agriculture? 7. Why have British colonies done better economically since decolonization than countries colonized by other European powers?8. In what way(s) did Import Substituting Industrialization succeed? In what way(s) did it fail? (Make sure you discuss at least one area of success and one area of failure). 9. What are the main similarities and differences between important-substituting industrialization and export-oriented industrialization? 10. Name a country that succeeded with Export Oriented Industrialization. Explain briefly how that worked. Why is Export Oriented Industrialization so hard to get right (i.e. why does it fail in other cases)?11. If the WTO finds that a country has violated its rules, it allows the country harmed by that violation to impose retaliatory tariffs. What is the downside of this system? Give an example.12. Tariffs were once 95% of U.S. government revenue. They are now about 1%. Why did we rely so heavily on tariffs early in our history? What challenges do low tariffs pose for governments in developing countries?13. The Doha round of WTO negotiations is stalled, so many countries are negotiating bilateral and free trade agreements instead. What are some implications of this? ................
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