(1) Use the Exports of Goods and Services and Imports of Goods and Services spreadsheets to complete the

following questions.

a. Table 1 is like Table 1.4 in our textbook. Please use the spreadsheets mentioned above to complete Table 1 for 2022.

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b. In Table 1.4 in the textbook, the Netherlands had the highest exports as a percentage of GDP and the highest imports as a
percentage of GDP. The United States had the lowest exports as a percentage of GDP and the lowest imports as a percentage of
GDP. Do these conclusions still hold in 2022?

When comparing table 1.4 in the textbook and table 1 conclusions hold for some countries: Netherlands keep itself as the highest exports
and imports as a percentage of a GDP country in 2022 and Germany stays in the second place. When it comes to US, we do not have data
about 2022, but if we grab the data from 2021 and we assume that the trend holds, it would continue to be the lowest exports and imports
as a percentage of a GDP country in 2022. Japan and China change positions being Japan the fifth one instead of the sixth one and China
taking the sixth instead of the fifth. When it comes to UK the percentages raise and it goes up to the third place and Canada goes down one
place being the forth highest one in terms of exports and imports as a percentage of GDP

c. What is the trend in exports as a percentage of GDP from 2010-2022 in the United States? What is the trend in imports as a
percentage of GDP from 2010-2022 in the United States?

These two graphs made in excel with the data provided can illustrate it. When it comes to the imports the highest point was in 2011 from
which the curve decreases until 2014 where it increases until it becomes the second highest peak and then it decreases again until 2016
where we find the second lowest point, then it increases until 2018 where it decreases again until 2020 where the lowest point point is
found, this is probably because of the pandemic. From 2020 on, it seems to be increasing and we do not have data for 2022.

Talking about the exports, it highest points are in 2011 and 2014 and between these years the curse seems flat. From 2014 on, it decreases
until 2016 where the second lowest point is found and then it increases until 2018 where it starts to decrease a little bit until 2020 where the
lowest point is again found. From this year on it seems to be increasing. We do not have data for 2022.

(2) Read the article titled You Decide: What Made Today’s North Carolina Economy? Discuss the advantages and disadvantages of
globalization for North Carolina mentioned in the article.

According to the article "You Decide: What Made Today's North Carolina Economy?" by Mike Walden, globalization had both advantages
and disadvantages for North Carolina's economy. On the one hand, globalization led to the departure of large parts of the state's
manufacturing base in textiles, apparel, and furniture to foreign countries. This resulted in job losses and economic decline in those
industries.

On the other hand, globalization also brought growth in the state's vehicle parts industry, which supplied auto assembly factories operating
in South Carolina. Additionally, globalization allowed for economic production to gravitate towards locations with the lowest costs, which
made North Carolina an attractive location for new companies in technology and pharmaceuticals.

Overall, the advantages and disadvantages of globalization for North Carolina's economy are complex and multifaceted. While it led to the
decline of some industries, it also created opportunities for growth in others. It is important for policymakers and business leaders to
carefully consider the potential impacts of globalization on their region's economy and work to mitigate any negative effects while
maximizing the benefits.
(3) Develop an example that shows how a nation could have an absolute advantage in the production of two goods, but only
have a comparative advantage in the production of one of them.

Let's look at a hypothetical scenario where there are two nations, A and B, and two products, cars and computers.

Premises: Compared to Country B, Country A can create more vehicles and computers with the same amount of resources because
it has an unbeatable edge in the production of both items.

But opportunity costs are the foundation of comparative advantage, and this is where the situation may vary for each good:

1. Absolute Advantage in Auto Production: - Country A is able to create cars at a higher rate than Country B. It can create
automobiles at a reduced opportunity cost because it has access to resources, trained labour, and better technology.

2. Computer Comparative Advantage: - Country A may discover that, even with an absolute advantage in both items, its opportunity
cost of producing computers is comparatively higher than that of Country B. Although Country B's opportunity cost for creating
computers is lower than that of Country A's, it may not be as efficient in making cars.

Explanation: - Because of its lower opportunity cost in automobile manufacture, Country A, with its complete advantage in both cars
and computers, may decide to specialise in cars. However, Country B may choose to focus on computers because there is a lower
opportunity cost there, despite having a comparative disadvantage in the automobile industry.

Specialisation and commerce can be advantageous for both nations. Cars can be exported from Country A to Country B, and
computers can be exported from Country B to Country A. This raises overall productivity and efficiency by enabling each nation to
acquire the good in which it has a comparative advantage at a reduced opportunity cost.

This example shows how a nation can have a comparative advantage in only one of two items it produces, even if it has an absolute
advantage in both. This is the foundation of profitable international trade.

(4) Use Table 2 to complete the following questions

a. Assume constant-cost conditions. Draw the production possibilities frontier (PPF) for each country with autos on the
horizontal axis and steel on the vertical axis of each country’s graph. Under autarky, assume that Japan produces and
consumes 600 autos and 300 tons of steel, and that South Korea produces and consumes 400 autos and 600 tons of steel.
Denote these points on each nation’s PPF.

b. Determine the MRT of steel to autos for each nation.

c. According to the principle of comparative advantage, should the two nations specialize? If so, which product should each country produce?

Comparing the MRTs, Japan has a comparative advantage in autos and South Korea a comparative advantage in steel so if they had to
specialise Japan would do it in autos and South Korea in steel.

d. Will the extent of specialization be complete or partial? Denote each nation’s specialization point on its PPF .

Given Japan's comparative advantage in autos, let's assume it specializes in auto production. For South Korea, it would specialize in
steel production.

Specialization points:

e. Compared to autarky, does specialization yield increased output? If so, by how much?

Compare the total output in autarky to the total output after specialization.

In autarky:
After specialization:
• Japan: 600 autos
• Japan: 750 autos
• South Korea: 400 autos
• South Korea: 800 steel
• Japan: 300 steel

• South Korea: 600 steel

It increases the output by 150 autos for Japan and 200 of steel for South Korea.

f. Within what limits will the terms of trade lie if specialization and trade occur?

The terms of trade will be somewhere between the opportunity costs of the two countries. If they agree on a rate that lies between 0.5
(Japan's MRT) and 1.5 (South Korea's MRT), they can both benefit from trade.
(5) Use Table 3 to complete the following questions.

a. Table 3 gives hypothetical export and import price indexes (2010 = 100) for the Netherlands, Germany, and Canada. Compute
the terms of trade for each country for the period 2010-2022.

100 92 11
.

100 100

100 125 71 .

b. Which country’s terms of trade improved, worsened, or stayed the same?

Terms of trade for Netherlands have worsened in 2022 in comparison with 2010 by almost 8 points. When it comes to Germany terms of
trade have stayed the same for these 12 years and finally, terms of trade have improved for Canada by almost 26 points between 2010 and
2022.