4. 27 marks) answer the following questions in full, complete sentences. 1-2 paragraphs should be sufficient for answering each question. a) (9 marks) Suppose that Canada is considering entering into a free trade agreement with New Zealand, a much smaller country with much less labour. The prime minister is against this trade agreement, claiming that Canada cannot gain from trade because New Zealand is so small. Using the Ricardian model, explain whether you would agree or disagree with the prime minister. Use only words, do not draw diagrams! b) 9 marks) You are home for the holidays and your uncle tells you that he is against free trade with countries that have more capital than Canada because people will lose jobs in manufacturing, which uses capital in production. Using the specific factors model ONLY (1.e. interpreting the world only through the specific factors model and its predictions), would you agree or disagree with your uncle's opinion? You may assume that the other sector, nonmanufacturing, uses land in production instead of capital. Use only words, do not draw diagrams! c) (9 marks) Recall the below figure from Lecture 2 (slide 37) about people's opinions about trade in advanced emerging, and developing countries. Use BOTH the Ricardian and specific factors models to evaluate whether trade creates jobs, trade decreases prices, and trade raises wages. Be clear about what jobs, prices, and wages you are referring to (i.e. post-trade? Pre-trade in the comparative advantage disadvantage sectors?). What would you conclude about people's beliefs about trade compared to what our models predict? Developing Nations Are Generally More Positive about Certain Trade Benefits chanced Emerging Developing Trade is good Foreign companies building factories in Buruntry TA 70 Rh 44 02 Trade creates jota 68 31 Foreign comenis buying domestie companies is good 57 Trode decreases prices Tradero wages 45 5C 4. 27 marks) answer the following questions in full, complete sentences. 1-2 paragraphs should be sufficient for answering each question. a) (9 marks) Suppose that Canada is considering entering into a free trade agreement with New Zealand, a much smaller country with much less labour. The prime minister is against this trade agreement, claiming that Canada cannot gain from trade because New Zealand is so small. Using the Ricardian model, explain whether you would agree or disagree with the prime minister. Use only words, do not draw diagrams! b) 9 marks) You are home for the holidays and your uncle tells you that he is against free trade with countries that have more capital than Canada because people will lose jobs in manufacturing, which uses capital in production. Using the specific factors model ONLY (1.e. interpreting the world only through the specific factors model and its predictions), would you agree or disagree with your uncle's opinion? You may assume that the other sector, nonmanufacturing, uses land in production instead of capital. Use only words, do not draw diagrams! c) (9 marks) Recall the below figure from Lecture 2 (slide 37) about people's opinions about trade in advanced emerging, and developing countries. Use BOTH the Ricardian and specific factors models to evaluate whether trade creates jobs, trade decreases prices, and trade raises wages. Be clear about what jobs, prices, and wages you are referring to (i.e. post-trade? Pre-trade in the comparative advantage disadvantage sectors?). What would you conclude about people's beliefs about trade compared to what our models predict? Developing Nations Are Generally More Positive about Certain Trade Benefits chanced Emerging Developing Trade is good Foreign companies building factories in Buruntry TA 70 Rh 44 02 Trade creates jota 68 31 Foreign comenis buying domestie companies is good 57 Trode decreases prices Tradero wages 45 5C
