1. Explain the difference between the "gains from exchange" and the "gains from specialisation" with the help of the production possibility frontier and community indifference curves. Discuss other sources of gains from trade.

2. "Free trade cannot be said to be beneficial to all sections of a trading nation. As such, it is necessary for it to be accompanied by an income redistribution policy." Discuss

3. "While a country as a whole will gain from trading with other nations, this does not mean that all sections of the community within the country will benefit." Discuss.

4. "Free trade is good for some but bad for others" Discuss this statement with the aid of the production possibility frontier and the Edgeworth box. Also explain whether free trade is a good or bad idea overall.

5. "Everyone benefits from free trade!" Discuss

1. "Differing factor endowments between countries is the basis for international trade." Explain this statement and assess its empirical validity.

2. "The predictions of the Heckscher-Ohlin model of international trade are not borne out in the real world." Discuss.

3. "A capital abundant country will export capital intensive goods." Discuss.

4. "The Heckscher Ohlin model makes very strong predictions but Leontief showed that this model fails to explain United states trading patterns." Explain the Heckscher-Ohlin model and discuss various explanations of the so called Leontief paradox.

Factor Price Equalization Theorem

2. "Explain how free international trade should lead to the equalisation of factor prices between countries according to the factor price equalisation theorem. Discuss why the theorem does not imply that real Gross Domestic Product per capita will be the same in all countries.

1. Compare and contrast the welfare effects of the imposition of a tariff by a small and a large country.

2. Critically examine the validity of the proposition that an "optimum tariff" will maximise the economic welfare of the tariff imposing country.

3. Explain how two large countries that have been involved in a "tariff war" can reach a tariff distorted equilibrium in which there is still some trade between the two countries. From the tariff distorted equilibrium explain why there are no incentives for either country to unilaterally reduce its tariff and discuss whether or not there are potential benefits to be had from joint tariff reductions.

Use offer curves and trade indifference curves to illustrate your analysis.

4. "Protection will raise the real income of the scarce factor of production within an economy." Discuss.

5. Explain the concept of an "optimum tariff" and examine the validity of the proposition that such a tariff will maximise the economic welfare of the tariff imposing country.

6. Explain what is meant by the optimum tariff argument for protectionism. Is the optimum tariff really a valid argument for protectionism ?

7. Examine the effects of a tariff in firstly a "small" country and explain why it is general deemed to be a bad idea. Discuss the "optimum tariff" argument which suggests that protectionism can be a good idea.

Economic Integration

1. "The formation of a Customs Union cannot be justified on purely economic grounds." Discuss.

2. "No single estimate of the effects of economic integration should be taken too seriously." Discuss this statement with reference to the European Union.

3. "Even if trade creation gains exceed trade diversion losses, this is not an adequate explanation as to why a country might wish to form a customs union with high cost trading partners." Discuss.

4. Economists do not necessarily think customs unions are a good idea. Discuss why this is the case with reference to trade creation and trade diversion effects and the Cooper and Massell critique.

1. "The GATT/WTO preference for the use of tariffs over quotas is extremely sensible." Discuss.

2. "While protectionism is bad, the World Trade Organisation preference for the use of tariffs over quotas as a protectionist device is extremely sensible." Discuss.

3. What are the key principles underlying the operation of the WTO ? To what extent do these principles make economic sense ?

1. "A current account deficit is not necessarily a bad thing." Discuss this statement.

2. You work in the economics office of a major bank. The bank is considering substantial participation in a major syndicated bank loan to the government of a less developed country called LATINA. A senior bank executive has asked you to write an economic report on LATINA. All he/she currently knows is that last year the country had a current account deficit of $3 billion. What type of data and analysis would you include in your report and why ?

Devaluation

1. "A devaluation will lead to a deterioration of the current account." Discuss this statement with reference to the elasticity approach to devaluation.

2. "A devaluation will lead to a improvement in the current account." Discuss this statement with reference to the absorption approach to devaluation.

3. "A devaluation will lead to a J-curve effect on the balance of payments." Discuss.

4. "Devaluation is a sign of economic failure and will do little to help improve the balance of payments or economic performance." Discuss.

The IS/LM/BP model

1. "Not only do the authorities need to employ as many policy instruments as they have targets, they need to get the pairing of instruments to targets correct." Discuss this statement with regard to the formulation of economic policy in an open economy.

2. Using IS-LM-BP analysis compare and contrast the effectiveness of fiscal and monetary policies at influencing the level of real output in an open economy under floating exchange rates. Discuss the limitations of the IS-LM-BP framework.

3. Using the IS/LM/BP model explain what is likely to happen following (i) a monetary contraction and (ii) a fiscal contraction under floating exchange rates. Discuss the main limitations of the IS/LM/BP model.

4. "Although authorities can achieve both internal and external balance without resort to exchange rate adjustment, this does not mean that exchange rate changes are undesirable." Discuss.

5. "Both monetary and fiscal policies must be actively used if an economy is to achieve both internal and external balance." Discuss.

6. Explain with the aid of diagrams the difference between Tinbergen's instruments-targets rule and Mundell's principle of effective market classification.

7. Discuss the importance of the degree of international capital mobility in determining the appropriate policy mix for the achievement of internal and external balance in an economy.

8. "Tinbergen's instruments-targets rule and the IS-LM-BP model show us how we can theoretically achieve simultaneous internal and external balance. However, their practical application to the real world is limited." Discuss.

The Monetary Model

1. "Excessive monetary growth leads to balance of payments problems under fixed exchange rates, and a currency problem under floating exchange rates." Discuss this statement with reference to the monetary approach to the balance of payments.

2. Examine separately the effects of (i) a decrease in domestic income and (ii) a rise in the foreign price level under both fixed and flexible exchange rates within the context of the monetary approach to the balance of payments. Discuss the contribution and limitations of this model.

4. "A one off monetary expansion will lead to a transitory balance of payments deficit under fixed exchange rates but a permanent depreciation of the exchange rate under floating exchange rates." Discuss.

1. Explain what you understand by purchasing power parity theory. How do you account for its poor performance at explaining exchange rate movements since 1973 ?

2. "Purchasing power parity (PPP) theory is useful for traded goods but useless for non traded goods." Discuss this statement and discuss the empirical validity of PPP since the advent of floating in 1973.

3. Explain the difference between Purchasing Power Parity (PPP) and Uncovered Interest Parity. Discuss the empirical validity on PPP.

4. Explain Dornbusch's model of exchange rate "overshooting" and discuss its contribution to our understanding of floating exchange rate behaviour.

5. "Modern asset market theories of exchange rate determination are far better at explaining observed exchange rate behaviour than Purchasing Power Parity theory." Discuss.

6. Can we successfully predict and model exchange rates ?

7. "Forecasting exchange rates is essentially a waste of effort." Discuss