Reference no: EM13872476

Instructions: Answer all the questions. Answers should be concise and to the point, not exceeding 400 words. You are encouraged to use diagrams, data and country illustrations to buttress your arguments.

1. How does international movement of labor affect the host economy? What are the benefits and costs of such movements? Why is labor movement opposed by some segments of society while welcomed by others?

2. Suppose that a country currently engages in free trade in automobiles but is exploring alternatives to protect this sector through trade policy. The country imposes an import tariff on automobiles. Use a graph showing the supply and demand curves of automobiles under free trade. Use the graph to show consumer surplus and producer surplus. Describe the net effect of the tariff on the country's welfare. Explain your answer.

3. Consider now the introduction of an import tariff on automobiles. This quota is so designed as to allow the importation of exactly as many automobiles as would be the case under the import tariff. Show how this policy affects the consumer surplus, producer surplus and government revenues. Explain if and how the welfare effects from such a quota differs from those of the import tariff.

4. Define and distinguish between portfolio investment and foreign direct investment. Why do most developing countries prefer foreign direct investment to portfolio investment? Feel free to use country examples to illustrate the risks and benefits of both types of capital flows.

5. What economic advantages do countries see in forming a free trade area? What are some of its negative consequences? What is Transpacific Partnership? Provide two arguments both for and against TPP.

6. Empirically, how do workers' remittances compare with other forms of external financial inflows for most developing countries? How do remittances help an economy compared to other forms of foreign exchange inflows? Is there any downside to remittances as far as the economy is concerned?