The International Economy

1. If laws restrict the importation of a particular foreign product, in order to protect the jobs of domestic workers who produce that product, how is it possible that this can end up reducing domestic employment?

2. Britain began importing farm products at a time when its own farmers were more efficient than the foreign farmers whose products it was importing. How could this be beneficial to Britain? How did this effect the international allocation of scarce resources which have alternative uses?

3. What are the three most important benefits of international trade? Explain each in terms of its effect on the efficient allocation of scarce resources which have alternative uses.

4. Why might the government of a Third World country prefer to receive a smaller amount of money as foreign aid, rather than a larger amount of money as private investment?

5. What is meant by a "favorable balance of trade"? Why was it considered favorable? Is it also favorable to producing prosperity in the economy?

6. When foreigners annually take more wealth out of the U.S. economy than the Gross Domestic Product of Egypt or Malaysia, how can that fail to make Americans poorer?

7. What economic difference does it make when the level of honesty in one country is very different from that in another country?

8. In the absence of restrictions on international trade, would low-wage countries tend to take jobs away from high-wage countries through lower production costs that would allow them to sell at lower prices?


9. The United States has often been a "debtor nation" owing more to people in other countries than people in other countries owe to Americans, while Switzerland has often been a "creditor nation," to whom others owe more to the Swiss than the Swiss owe to others. What tends to lead to this difference and is it economically beneficial or harmful to Americans or Swiss?

10. What were the causes and effects of a large worldwide decline in international trade in the 1930s compared to the 1920s?

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