Question 1
(a) Interpret the prediction of the Hecksher-Ohlin theorem on international trade in the exports and imports.
(b) Determine three (3) critical assumptions of a simplistic and specific version of Hecksher-Ohlin theory for gains in trade, which can be challenged as not true in the real world?
(c) Demonstrate why the highly restrictive assumption of the Hecksher-Ohlin theorem that determines the pattern of international trade, which is also referred to as the factor proportion theory, is also deemed as unrealistic?
Question 2
(a) Analyze what triggered President Trump in the U.S. in 2018 to impose protectionistic tariffs on China, Mexico, Canada, and the European Union.
(b) Discuss, with an appropriate diagram, how the U.S.-China trade war led to economic inefficiencies.
(c) Discuss how China as the Factory of the World is based on its comparative advantage while the U.S. loses its competitiveness.
Question 3
(a) Interpret the balance of payments in aggregate components of the current and capital/financial account to explain an economy’s position in the international trade and finance in any country of your choice.
(b) Using the country from the balance of payments table used in part 3(a), discuss how its strength or weakness in trade in its current account is offset or balanced by its capital account
Question 4
(a) The European Union (E.U.) has grown from 6 to 28 member states (including the United Kingdom though the U.K. plans to leave the E.U.). In theory, EU28 has completed the whole integration process, from Preferential Trade Area to Economic Union. However, economic integration without political integration is incomplete because political sovereignty matters as much as economics does. Explain the theoretical benefits of the five (5) stages of economic integration.
(b) Examine any lessons for the Association of Southeast Asian Nations (ASEAN) to learn from the theory of economic integration and the Brexit in practice?