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International Economic relations 2018 past paper for Loughborough University
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International Economic relations 2018 past paper for Loughborough University
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INTERNATIONAL ECONOMIC RELATIONS(17ECB005)
May/June 2018 3 Hours
Answer THREE questions.
All questions carry equal marks.
Candidates may use any approved calculator.
1. “We have a MASSIVE trade deficit with Germany… Very bad for U.S.” President Donald
J. Trump, Twitter, 30 May 2017.
President Trump’s tweet seems to imply that: A country with balanced trade should be
indifferent between free trade and autarky. Evaluate the italicised statement using the
Ricardian model. (100 marks)
2. (a) A-land contains a higher ratio of skilled to unskilled workers than does F-land. Use
the Heckscher-Ohlin-Samuelson and Stolper-Samuelson theorems to predict the effects
of free trade between A-land and F-land. (60 marks)
(b) For a country like A-land, what does the empirical evidence suggest concerning the
effect of trade liberalisation on earnings inequality? (40 marks)
3. (a) Use appropriate diagrams to compare and contrast how the imposition of an import
tariff by its government affects welfare in a small and a large country. (60 marks)
(b) “A key reason for the persistence of tariffs on imports is that the benefits they
generate are concentrated whilst their costs are dispersed.” Explain. (40 marks)
4. “The failure of attempts to explain global FDI flows at the macroeconomic level suggests
that the positive analysis of FDI should start with the special characteristics of the
multinational enterprise.” Evaluate this claim using MacDougall’s macroeconomic model
of, and Dunning’s microeconomic OLI approach to, foreign direct investment (FDI).
(100 marks)
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