FIN415 Class Web
Page, Spring '24
Jacksonville
University
Instructor:
Maggie Foley
Term Project Part I
(due with final)
Term
project part II (excel questions)
(due with final)
Weekly SCHEDULE,
LINKS, FILES and Questions
Week |
Coverage, HW, Supplements -
Required |
Supplemental Reaching Materials |
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Week 1 |
Marketwatch Stock Trading Game (Pass
code: havefun) 1. URL for your game: 2. Password for this private
game: havefun. 3. Click on the 'Join Now'
button to get started. 4. If you are an
existing MarketWatch member, login. If you are a new user, follow
the link for a Free account - it's easy! 5. Follow the instructions and
start trading! 6. Game will be over
on 4/17/2019 How to Use
Finviz Stock Screener (youtube, FYI)
How To Win
The MarketWatch Stock Market Game (youtube, FYI)
How Short Selling
Works (Short Selling for Beginners) (youtube, FYI)
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PRESS RELEASE OCTOBER 4,
2023 World Bank’s Fall 2023 Regional Economic Updates
East
Asia and the Pacific: Growth in developing East Asia and
Pacific is projected to remain strong at 5% in 2023 but will ease in the
second half of 2023 and is forecast to be 4.5% during 2024, the World Bank
said on Sunday in its semi-annual economic
outlook for the region. Europe and
Central Asia: Economic growth for the emerging market and developing
economies (EMDEs) of the Europe and Central Asia region has been revised up
to 2.4% for 2023, says the World Bank’s Economic
Update for the region, released today. Latin America
and the Caribbean: Latin America and the Caribbean (LAC) made
progress in macroeconomic resiliency over previous decades and navigated the
multiple post-pandemic crises with relative success. Yet, according to a new World Bank
report, growth remains inadequate to reduce poverty and create
jobs, while fiscal constraints limit necessary investments. Middle East
and North Africa: Growth of the economies in the Middle East
and North Africa (MENA) is expected to fall sharply this year. The region’s
gross domestic product (GDP) is forecast to plummet to 1.9% in 2023 from 6%
in 2022, due to oil production cuts amidst subdued oil prices, tight global
financial conditions, and high inflation, according to the latest issue of
the World Bank MENA Economic Update (MEU). South
Asia: South Asia is expected to grow by 5.8% this year—higher
than any other developing country region in the world, but slower than its
pre-pandemic pace and not fast enough to meet its development goals, says the
World Bank in its twice-a-year regional
outlook. Sub-Saharan Africa: Sub-Saharan Africa’s economic outlook remains bleak amid an elusive growth recovery. According to the latest World Bank Africa’s Pulse report, rising instability, weak growth in the region’s largest economies, and lingering uncertainty in the global economy are dragging down growth prospects in the region. In class exercise: 1. In 2023, which region is projected to have
the highest economic growth? A) East
Asia and the Pacific B)
Europe and Central Asia C)
South Asia Answer:
A the Pacific Explanation: According to the World Bank, East Asia and the Pacific are projected
to have the highest growth at 5% in 2023. 2. Why is economic growth in the Middle
East and North Africa (MENA) expected to fall sharply in 2023? A)
Increased oil production B)
Subdued oil prices C)
Improved global financial conditions Answer: B Explanation: The decline in economic growth in MENA is attributed to oil
production cuts amidst subdued oil prices, among other factors. 3. Which region's economic growth has
been revised up for 2023? A)
Latin America and the Caribbean B)
Sub-Saharan Africa C)
Europe and Central Asia Answer:
C Explanation: The World Bank's Economic Update for the Europe and Central Asia
region revised the growth for 2023 up to 2.4%. 4. What is the projected growth rate for
South Asia in 2023? A) 3.5% B) 5.8% C) 7.2% Answer:
B Explanation: South Asia is expected to grow by 5.8% in 2023 according to the
World Bank. 5. Why does Latin America and the
Caribbean face challenges despite progress in macroeconomic resiliency? A) Insufficient
job creation B) Lack
of poverty reduction C)
Fiscal constraints limiting investments Answer:
C Explanation: The World Bank report mentions that fiscal constraints limit
necessary investments despite progress in macroeconomic resiliency. 6. What is the primary reason for the
projected decline in economic growth in the Middle East and North Africa in
2023? A) Oil production cuts B)
Inflation C) Global financial stability Answer:
A Explanation: The World Bank MENA Economic Update attributes the decline in
economic growth to oil production cuts, among other factors. 7. How does South Asia's expected growth in
2023 compare to its pre-pandemic pace? A)
Higher B)
Lower C) Same Answer:
B Explanation: The World Bank mentions that South Asia's expected growth in 2023 is
slower than its pre-pandemic pace. 8. Which region is forecasted to have the
slowest growth in 2024? A)
Latin America and the Caribbean B) East
Asia and the Pacific C)
Middle East and North Africa Answer:
A Explanation: According to the World Bank,
growth in Latin America and the Caribbean is forecasted to be 4.5% in 2024. Published on Let's Talk Development
https://blogs.worldbank.org/developmenttalk/global-economic-outlook-five-charts-1
The global economy is set to slow substantially in 2023. The
lagged and current effects of monetary tightening, as well as more
restrictive credit conditions, are expected to weigh on activity in the
second half of the year, with weakness persisting into 2024. Excluding China,
growth in emerging market and developing economies (EMDEs) is set to decline
markedly, with the outlook weakest in countries with elevated fiscal and
financial vulnerabilities. The resurgence of recent banking sector turmoil
represents a serious risk. Widespread financial stress could have especially
severe economic consequences.
1. Global growth is slowing
The global economy is forecast to slow substantially this
year, with a pronounced deceleration in advanced economies. Monetary tightening
is expected to have its peak impact this year for many major economies.
Global growth is forecast to decline to 2.1 percent in 2023, a full
percentage point less than in 2022, before a tepid recovery to 2.4 percent in
2024. In emerging market and developing economies (EMDEs) excluding China,
growth is projected to fall to 2.9 percent in 2023, from 4.1 percent in 2022,
as tight global financial conditions and subdued external demand weigh on
activity. Global growth could weaken more than anticipated in the event of
further financial sector stress, or if persistent inflation prompts tighter-than-expected
monetary policy. Contributions
to global growth
In
class exercise 1.
What is the forecasted global growth rate for 2023? A)
3.1% B)
2.1% C)
4.4% Answer:
B Explanation:
The global economy is forecasted to slow substantially in 2023, with a
projected growth rate of 2.1%. 2.
What is the primary factor expected to contribute to the global economic
slowdown in 2023? A)
Monetary tightening B)
Increased government spending C)
Expansionary credit conditions Answer:
A Explanation:
The lagged and current effects of monetary tightening are anticipated to
substantially slow the global economy in 2023. 3.
How much is global growth forecasted to recover in 2024? A)
1.4% B)
3.4% C)
2.4% Answer: C Explanation:
After the projected decline in 2023, global growth is expected to experience
a recovery to 2.4% in 2024. 4.
In emerging market and developing economies (EMDEs) excluding China, what is
the projected growth rate for 2023? A)
3.9% B)
2.9% C)
4.8% Answer:
B Explanation:
Growth in EMDEs, excluding China, is projected to fall to 2.9% in 2023 due to
tight global financial conditions and subdued external demand. 5.
What could lead to a more severe weakening of global growth according to the
information? A)
Further financial sector stress B)
Government stimulus packages C)
Decreased inflation Answer: A Explanation:
Further financial sector stress could lead to a more severe weakening of
global growth. 6.
Which sector poses a serious risk to the global economy? A)
Technology B)
Healthcare C)
Banking Answer: C Explanation:
The resurgence of recent banking sector turmoil represents a serious risk to
the global economy. 7.
What is the expected impact of monetary
tightening on advanced economies in 2023? A)
Acceleration of growth B)
Pronounced deceleration C)
Stable economic conditions Answer: B Explanation:
Monetary tightening is expected to have a pronounced decelerating impact on
advanced economies in 2023. 8.
What is the primary reason for the
projected decline in growth in emerging market and developing economies
(EMDEs) excluding China? A)
Subdued external demand B)
Increased government investment C)
Expansive credit conditions Answer: A Explanation:
The decline in growth is attributed to tight global financial conditions and
subdued external demand. 9.
How much is global growth expected to
decline in 2023 compared to 2022? A)
0.5% B)
1.0% C)
1.5% Answer: B Explanation:
Global growth is forecasted to decline by a full percentage point, from 3.1%
in 2022 to 2.1% in 2023. |
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Part II In class exercise – practice of
converting currencies 1. If the dollar
is pegged to gold at US $1800 = 1 ounce of gold and the British pound is
pegged to gold at £1200 = 1 ounce of gold. What should be the exchange rate between
US$ and British £? How much can you make without any risk if the exchange
rate is 1£ = 2$? Assume that your initial investment is $1800. What about the
exchange rate
set at 1£ = 1.2$? What about your initial investment is £1200? Solution: 1£ = 2$ (note
that the exchange rate is set at 1£ = 1.5$ since $1800 = £1500=1 ounce of
gold è $1.5=1£). è With $1800, you can buy 1 ounce of gold at US $1800
= 1 ounce of gold. èWith
one ounce of gold, you can sell it in UK at £1200 = 1 ounce of gold, so you
can get back £1200 è convert
£ to $ at $2=1£ as given èget
back £1200 * 2$/£ = $2400 > $1800, initial investment è you could make a profit of $600 ($2400 -
$1800=$600) è Yes. 1£ = 1.2$ (note
that the exchange rate is set at 1£ = 1.5$ since $1800 = £1500=1 ounce of
gold è $1.5=1£). è With $1800, you can buy either 1 ounce of gold at US
$1800 = 1 ounce of gold. è With
one ounce of gold, you can sell it in UK at £1200 = 1 ounce of gold, so you
can get back £1200 è convert
£ to $ at $1.2=1£ as givenèget
back £1200 * 1.2$/£ = $1440 < $1800 è you will lose $360 ($1440 - $1800=$-360) è No. è So should convert to £ first and then buy gold in
UK è With $1800, you can convert to £1500 ($1800 /
(1.2$/£ = £1500 ). è buy
gold in UK at £1200 = 1 ounce of gold, so you can get back £1500/£1200 = 1.25
ounce of gold è Sell gold in US at US $1800 = 1 ounce of
gold è So get back 1.25 ounce of gold * $1800 = $2250 >
$1800 è you will make a profit of $450 ($2250 -
$1800=$450) è Yes. 2. If the Euro (EUR) to US Dollar
(USD) exchange rate is 1.18, and the US Dollar to Japanese Yen (JPY) exchange
rate is 110, what is the implied exchange rate between Euro and Japanese Yen?
Answer: The implied exchange rate between
Euro and Japanese Yen is approximately 129.80 (110 * 1.18). Explanation: ·
1
EUR = 1.18 USD; 1 USD = 110 JPY. So
1.18 USD/EUR * 110 JPY/USD = 1.18 * 110 = 129.80 JPY/EUR (one EUR =
129.80 JPY) ·
Or,
1 EUR = 1.18 USD è 1 USD = (1/1.18) EUR; 1USD
= 110 JPY, so è (1/1.18)EUR = 110 JPY è 1 EUR = 110/(1/1.18) =
129.80 JPY 3. If the Euro to the British
Pound (GBP) exchange rate is 0.85, and the Swiss Franc (CHF) to Euro exchange
rate is 1.10, what is the implied exchange rate between British Pound and
Swiss Franc? Answer: The implied exchange rate
between British Pound and Swiss Franc is approximately (1/0.85)/1.1 = 1.07 CHF/GBP è one GBP is worth 1.07 CHF Explanation: ·
1
EUR = 0.85 GBPè 1 GBP = (1/0.85) EUR, 1
CHF = 1.10 EUR, so (1/0.85) EUR/ GBP / 1.1 EUR/CHF = (1/0.85)/1.1 CHF/EUR =
1.07 CHF/GBP ·
Or
1 EUR = 0.85 GBP, 1 CHF=1.1 EUR è 1 EUR = (1/1.1) CHF, so 1
EUR = 0.85 GBP = (1/1.1) CHF è 1 GBP = (1/1.1)/0.85 =
1.07 CHF 4. If the Australian Dollar
(AUD) to US Dollar exchange rate is 0.75, and the Canadian Dollar (CAD) to US
Dollar exchange rate is 1.25, what is the implied exchange rate between
Australian Dollar and Canadian Dollar? Answer: The implied exchange rate
between Australian Dollar and Canadian Dollar is 0.60 (0.75 / 1.25). Explanation: ·
1
AUD = 0.75 USD, 1 CAD = 1.25 USD, So 1 AUD can get 0.75 USD, and since 1 USD
can get (1/1.25=0.8) 0.8 CAD, so 1 AUD = 0.75 *(1/1.25) = 0.6 CAD. So one AUD
is worth 0.6 CAD. ·
Or,
0.75USD/AUD * (1/1.25) CAD/USD = 0.75 * 0.8 CAD/AUD = 0.6 CAD/AUD Homework chapter1-1 (due with first
midterm exam) 1.
If the dollar is pegged to gold at US $1800 = 1 ounce of
gold and the British pound is pegged to gold at €1500 = 1 ounce of gold. What
should be the exchange rate between US$ and Euro €? How much can you make
without any risk if the exchange rate is 1€ = 1.5$? (hint: $1800 è get gold
è sell
gold for euro è convert
euro back to $) How much can you make without any risk if
the exchange rate is 1€ = 0.8$? (hint: $1800 è
get euro è buy gold using euro è
sell gold for $) Assume that your initial
investment is $1800. (answer: $1.2/euro, $450, $900) 2.
If USD to the Chinese Yuan (CNY)
exchange rate is 7.35, and USD to the Indian Rupee (INR) exchange rate is 94.20,
what is the implied exchange rate between Chinese Yuan and Indian Rupee, eg 1
CNY = ? INR? (answer: 1 CNY = 12.816
INR) 3.
If the New Zealand Dollar (NZD) to
Australian Dollar (AUD) exchange rate is 1.05, and the Singapore Dollar (SGD)
to New Zealand Dollar exchange rate is 0.94, what is the implied exchange
rate between Singapore Dollar and Australian Dollar? (answer: 1 AUD = 1.013 SGD, or 1 SGD = 0.987 AUD) 4.
What is your opinion on
arbitrage across borders? Do you think that arbitrage crypto will work? (Optional homework question) Crypto
arbitrage:Cryptocurrency arbitrage is a strategy in which investors buy a
cryptocurrency on one exchange, and then quickly sell it on another exchange
for a higher price. Cryptocurrencies trade on hundreds of different
exchanges, and often the price of a coin or token may differ on one exchange
versus another. How I Became A Crypto Billionaire
In 5 Years (CNBC)
The FTX Collapse,
Explained | What Went Wrong | WSJ (youtube)
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Sam Bankman Fried Explains His Arbitrage Techniques Nicholas Pongratz, April 9, 2021·3 min read https://www.yahoo.com/video/sam-bankman-fried-explains-arbitrage-132901181.html A former ETF trader at Jane Street, Sam Bankman-Fried developed a
net worth of $9 billion from trading crypto in three and a half years. He
explained his success comes from lucrative arbitrage opportunities in crypto. Bankman-Fried launched a crypto-trading firm called Alameda Research
in 2017. The company now manages over $100 million in digital assets. The
firm’s large-scale trades made Bankman-Fried a self-made billionaire by the
age of 29. He is also the CEO and founder of the FTX Exchange, a
cryptocurrency derivatives trading exchange. Upon
entering the crypto markets, he discovered that Bitcoin was growing very
rapidly in trading volumes. This meant there would also be large price
discrepancies, making it ideal for arbitrage, taking advantage of the price
differences. The
Kimchi Premium One
opportunity he exploited was what is known as the kimchi premium. While
Bitcoin was pricing at around $10,000 in the US, it traded for $15,000 on
Korean exchanges. This was because of a huge demand for Bitcoin in Korea,
Bankman-Fried said. Around its peak, there was a vast spread of around 50%, he said. However,
because the Korean won is a regulated currency, it was difficult to scale
this arbitrage. Bankman-Fried said: “Many found a way to do it for small size. Very, very hard to do it
for big size, even though there are billions of dollars a day volume trading
in it because you couldn’t offload the Korean won easily for non-crypto.” Although nowhere near as significant, the premium still exists today.
According to CryptoQuant, the premium is listed at 18%. 10% Daily Returns in Japan Bankman-Fried
then sought a similar opportunity in other markets, which he found in Japan.
He said: “It
wasn’t trading quite the same premium. But it was trading at a 15% premium or
so at the peak, instead of 50%.” After
buying Bitcoin for $10,000 in the US, investors could send it to a Japanese
exchange. There they could sell it for $11,500 worth of Japanese yen. At that
point, they could convert the amount back to dollars. Because
of the trade’s global nature and the wire transfers involved, it would take
up to a day to perform. ”But it was doable, and you could scale it, making
literally 10% per weekday, which is just absolutely insane,” Bankman-Fried
said. Bankman-Fried was successful where others were not because he managed
to facilitate all the different components involved in the trade. For
example, finding the right platform to buy Bitcoin at scale, then getting
approval to use Japanese exchanges and accounts. There was also the
difficulty of even getting millions of dollars out of Japan and into the US
every day. “You do have to put together this incredibly sophisticated global
corporate framework in order to be able to actually do this trade,”
Bankman-Fried said. “That’s the real task, the real hard part.” High
Edge, Low Risk The
decentralized aspect of the crypto ecosystem enables these large arbitrage
premiums to exist. With other financial markets, there is a cross merging
between exchanges and central clearing firms or brokers, Bankman-Fried
explained. “So it’s really capital-intensive, and also you have to worry about
counterparty risk,” he added. But once investors and traders come to understand the crypto space
intimately, they can figure out where the counterparty risk is close to zero,
but the edge is still high. According to Bankman-Fried: “There’s a lot of money to be made, if you can really figure out and
pinpoint when there is and isn’t a ton of edge and when there is and isn’t a
ton of actual counterparty risk.” For
discussion: ·
Any issues with SBF’s trading strategy? Hint: ·
Market Volatility: Cryptocurrency markets are
known for their volatility. Sudden and unpredictable price movements can
affect arbitrage opportunities, leading to unexpected gains or losses. ·
Regulatory Challenges: Dealing with different
regulations in various countries poses a challenge, as mentioned in the case
of the Kimchi Premium in Korea. Regulatory changes or uncertainties can
impact the feasibility and scalability of the strategy. ·
Execution Risk: Coordinating large-scale trades
across different exchanges and regions involves execution risks, such as
delays in wire transfers and potential slippage in prices during the
execution of trades. ·
Liquidity Concerns: In less liquid markets or
during times of high demand, executing large trades without significantly
impacting the market price can be challenging. ·
Other issues??? Changes in investors’
preferences? Market competition? In class
exercise 1. What contributed
significantly to Sam Bankman-Fried's net worth growth in the crypto market? A) Launching a cybersecurity firm B) Exploring lucrative arbitrage opportunities C) Founding a traditional stock brokerage Answer:
B Explanation: Sam Bankman-Fried attributes his success to
identifying and capitalizing on lucrative arbitrage opportunities in the
crypto market. 2. In which year
did Sam Bankman-Fried launch the crypto-trading firm Alameda Research? A) 2015 B) 2017 C) 2019 Answer:
B Explanation: Alameda Research, Sam Bankman-Fried's
crypto-trading firm, was launched in 2017. 3. What is the
primary reason behind the kimchi premium in the crypto market? A) High demand for Bitcoin in Korea B) Regulatory restrictions on Bitcoin trading C) A decline in global Bitcoin trading volumes Answer:
A Explanation: The kimchi premium occurs due to the
significant demand for Bitcoin in Korea, leading to price discrepancies. 4. How did
Bankman-Fried exploit the kimchi premium? A) By manipulating exchange rates B) By taking advantage of
large price discrepancies C) By offloading Korean won
for non-crypto Answer:
C Explanation: Bankman-Fried found it challenging to scale
the arbitrage due to difficulties in offloading Korean won for non-crypto. 5. In the Japanese market, what premium did
Bitcoin trade at its peak? A) 5% B) 15% C) 30% Answer:
B Explanation: Bitcoin traded at a 15% premium in the
Japanese market at its peak, according to Sam Bankman-Fried. 6. What was the
approximate daily return Sam Bankman-Fried mentions for the Japan-related
arbitrage opportunity? A) 5% B) 15% C) 10% Answer:
C Explanation: Bankman-Fried mentioned making
approximately 10% per weekday with the Japan-related arbitrage opportunity. 7. Why does
Bankman-Fried emphasize the importance of a sophisticated global corporate
framework for successful trades? A) To manage counterparty risk
B) To avoid taxes C) To manipulate market prices Answer:
A Explanation: A sophisticated global corporate framework
is necessary to manage counterparty risk and execute complex trades successfully. 8. According to
Bankman-Fried, what makes the crypto space different from traditional
financial markets in terms of arbitrage? A) Higher counterparty risk B) Lower edge C) Decentralized nature and low counterparty risk Answer:
C Explanation: The decentralized nature of the crypto
space reduces counterparty risk, making it more favorable for arbitrage
compared to traditional markets. 9. What does Bankman-Fried highlight as the key
to successful arbitrage in the crypto space? A) High capital investment B) Extensive market knowledge C) Diversified portfolio Answer:
B Explanation: According to Bankman-Fried, understanding
the crypto space intimately is crucial for identifying when there is a high
edge and low counterparty risk in arbitrage opportunities. |
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Part III: Multilateral
Trade vs. Bilateral Trade Trade agreement
(video)
Summary:
The
video mentions several forms of trade barriers, including: ·
Tariffs
or Taxes on Goods: These are mentioned as taxes imposed on
imported goods to make them more expensive in the domestic market. ·
Quotas
or Limits on Quantity: The video discusses limits set on the
quantity or value of goods that can be imported during a specific period, restricting
the volume of foreign products. ·
Standards:
Regulations and requirements, such as safety standards or non-genetically
modified organism (GMO) ingredients, are highlighted as factors influencing
trade. ·
Administrative
Delays: The video refers to inspections,
paperwork, and bureaucratic procedures causing delays in the importation of
goods. ·
Countertrade
Requirements: Mandates for the trade partner to
purchase something from the country are mentioned as a form of reciprocal
obligation in trade agreements. ·
Embargoes:
Complete trade restrictions with specific countries, mentioned in the context
of political actions or disagreements. In class exercise: Question
1: What is a tariff in international
trade? a)
A limit on the quantity of imported goods b)
A tax imposed on exported goods c)
A tax imposed on imported goods Answer: C Explanation:
Tariffs are taxes imposed on imported goods to make them more expensive in
the domestic market. Question
2: What is the purpose of quotas in international trade? a)
To encourage free trade b)
To limit the quantity of imported goods
c)
To set safety standards for imported goods Answer: B Explanation:
Quotas are restrictions on the quantity or value of imported goods during a
specific period. Question
3: How do administrative delays impact international trade? a)
They create delays through inspections and paperwork b)
They expedite the importation process c)
They reduce taxes on imported goods Answer: A Explanation:
Administrative delays involve inspections and paperwork, causing delays in
the importation process. Question
4: What is the purpose of countertrade requirements in trade agreements? a)
To eliminate trade restrictions b)
To create reciprocal obligations for trade partners c)
To set safety standards for exported goods Answer: B Explanation:
Countertrade requirements mandate that the trade partner must purchase
something from the country, creating reciprocal obligations. Question
5: What does an embargo in international trade involve? a)
A tax imposed on imported goods b)
Limits on the quantity of exported goods c)
Complete trade restrictions with specific
Answer: C Explanation:
Embargoes involve complete trade restrictions with specific countries. Question
6: What is the primary purpose of tariffs? a)
To encourage imports b)
To discourage exports c)
To make imported goods more expensive Answer: C Explanation:
Tariffs are taxes imposed on imported goods to make them less competitive in
the domestic market. Question
7: How do quotas impact the availability of foreign goods? a)
They increase the quantity of imported goods b)
They restrict the quantity of imported goods
c)
They have no impact on imported goods Answer: B Explanation:
Quotas limit the quantity or value of imported goods, restricting their
availability. Question
8: What role do standards play in international trade? a)
They set tax rates on exported goods b)
They regulate safety and product specifications c)
They encourage free trade Answer: B Explanation: Standards
involve regulations specifying safety requirements or certain product
specifications. Question
9: How do embargoes differ from tariffs? a)
Embargoes involve complete trade restrictions with specific countries b)
Tariffs are taxes on exported goods c)
Embargoes encourage free trade Answer: A Explanation:
Embargoes involve complete trade restrictions with specific countries, while
tariffs are taxes on imported goods. Multilateralism Explained
| Model Diplomacy (youtube)
In class exercise Question
1: What is the primary focus of multilateralism? a)
Cooperation between two countries b)
Cooperation between three or more countries
c)
Cooperation within a single country Answer: B Explanation:
Multilateralism involves cooperation amongst three or more countries to find
cooperative solutions to common problems. Question
2: Which issue is mentioned as an example of a global problem that requires
multilateral cooperation? a)
Climate change b)
National security c)
Economic inequality Answer: A Explanation:
Climate change is cited as a problem that doesn't respect national boundaries
and requires global cooperation. Question
3: What is the challenge posed by global epidemics? a)
Limited impact on international travel b)
Isolation within a single country c)
Ease of spread between countries Answer: C Explanation:
Global epidemics can spread easily from one country to another, especially
with international travel. Question
4: What are traditional examples of universal membership organizations for
multilateral cooperation? a)
Regional alliances b)
The United Nations, the International Monetary Fund, the World Bank c)
Bilateral agreements Answer: B Explanation:
Traditional examples include global organizations like the United Nations,
the International Monetary Fund, and the World Bank. Question
5: Which multilateral institution is highlighted as an example beyond
treaty-based bodies? a)
United Nations b)
Group of 20 (G20) c)
World Health Organization Answer B Explanation:
The G20, composed of major economies, is mentioned as a broader multilateral
institution. Question
6: What does the G20 symbolize? a)
Exclusivity of Western countries b)
Isolation from emerging nations c)
Expansion of the table to include new global actors Answer C Explanation:
The G20 symbolizes the need to include new actors transforming the world in
global decision-making. Question
7: Which nations are mentioned as part of the BRIC nations? a)
Brazil, Russia, India, China b)
Belgium, Romania, Indonesia, Canada c)
Bahrain, Rwanda, Iran, Colombia Answer: A Explanation:
BRIC stands for Brazil, Russia, India, and China. Question
8: What is mentioned as a challenge to multilateral cooperation in terms of
established powers? a)
Consistent alignment of priorities b)
Difficulty in compromise and sacrifice c)
Homogeneity of values Answer: B Explanation:
Cooperation in multilateral settings requires compromise and sacrifice, which
may be challenging for established powers. Answer Take
away: ·
Multilateral trade
agreements strengthen the global economy by making developing countries
competitive. ·
They standardize
import and export procedures giving economic benefits to all member
nations. ·
Their complexity
helps those that can take advantage of globalization, while those who cannot
often face hardships. For
class discussion: Do you agree with the above points?
Why or why not? Multilateral Trade
Agreements With Their Pros, Cons and Examples
5 Pros and 4 Cons to the World's
Largest Trade Agreements https://www.thebalance.com/multilateral-trade-agreements-pros-cons-and-examples-3305949 BY KIMBERLY AMADEO REVIEWED
BY ERIC ESTEVEZ Updated October
28, 2020 Multilateral trade
agreements are commerce treaties among three or more nations. The
agreements reduce tariffs and make
it easier for businesses to import and export. Since they are
among many countries, they are difficult to negotiate. That same broad scope makes them more
robust than other types of trade agreements once all
parties sign. Bilateral agreements are
easier to negotiate but these are only between two countries. They don't
have as big an impact on economic growth as does a multilateral
agreement. 5 Advantages of multilateral
agreements · Multilateral
agreements make all signatories treat each other equally. No country can
give better trade deals to one country than it does to another. That
levels the playing field. It's especially critical for emerging
market countries. Many of them are smaller in
size, making them less competitive. The Most
Favored Nation Status confers the
best trading terms a nation can get from a trading partner. Developing
countries benefit the most from this trading status. · The
second benefit is that it increases trade for every participant. Their
companies enjoy low tariffs. That makes their exports
cheaper. · The
third benefit is it standardizes commerce regulations for all
the trade partners. Companies save legal costs since they follow the same
rules for each country. · The
fourth benefit is that countries can negotiate trade deals with
more than one country at a time. Trade agreements undergo
a detailed approval process. Most countries would prefer to get one
agreement ratified covering many countries at once. · The
fifth benefit applies to emerging markets. Bilateral trade agreements
tend to favor the country with the best economy. That puts the weaker nation
at a disadvantage. But making emerging markets stronger helps the
developed economy over time. As those emerging markets become
developed, their middle class population increases. That creates
new affluent customers for everyone. 4 Disadvantages of multilateral
trading · The
biggest disadvantage of multilateral agreements is that they are
complex. That makes them difficult and time consuming to
negotiate. Sometimes the length of negotiation means it won't take place
at all. · Second,
the details of the negotiations are particular to trade and business
practices. The public often misunderstands them. As a result, they receive
lots of press, controversy, and protests. · The
third disadvantage is common to any trade agreement. Some companies and
regions of the country suffer when trade borders disappear. · The
fourth disadvantage falls on a country's small businesses. A
multilateral agreement gives a competitive advantage to giant
multi-nationals. They are already familiar with operating in a
global environment. As a result, the small firms can't compete. They lay off
workers to cut costs. Others move their factories to countries with a
lower standard of living. If a region depended on that industry, it
would experience high unemployment rates. That makes multilateral
agreements unpopular. Pros
Cons
Examples Some regional trade
agreements are multilateral. The largest had been the North American
Free Trade Agreement (NAFTA), which was ratified on
January 1, 1994. NAFTA quadrupled trade between the United
States, Canada, and Mexico from its 1993 level to
2018. On July 1, 2020, the U.S.-Mexico-Canada Agreement (USMCA) went
into effect. The USMCA was a new trade agreement between the three countries
that was negotiated under President Donald Trump. The Central American-Dominican
Republic Free Trade Agreement was signed on August 5, 2004. CAFTA-DR
eliminated tariffs on more than 80% of U.S. exports to six countries: Costa
Rica, the Dominican Republic, Guatemala, Honduras, Nicaragua, and El
Salvador. As of November 2019, it had increased trade by 104%, from
$2.44 billion in January 2005 to $4.97 billion. The Trans-Pacific
Partnership would have been bigger than NAFTA.
Negotiations concluded on October 4, 2015. After becoming
president, Donald Trump withdrew from the agreement. He promised to
replace it with bilateral agreements. The TPP was between
the United States and 11 other countries bordering the Pacific
Ocean. It would have removed tariffs and standardized business
practices. All global trade agreements
are multilateral. The most successful one is the General
Agreement on Trade and Tariffs. Twenty-three countries signed GATT in
1947. Its goal was to reduce tariffs and other trade barriers. In September 1986, the Uruguay
Round began in Punta del Este, Uruguay. It centered on extending
trade agreements to several new areas. These included services and
intellectual property. It also improved trade in agriculture and
textiles. The Uruguay Round led to the creation of the World Trade
Organization. On April 15, 1994, the 123 participating governments
signed the agreement creating the WTO in Marrakesh, Morocco. The
WTO assumed management of future global multilateral negotiations. The WTO's first project was the Doha round of
trade agreements in 2001. That was a
multilateral trade agreement among all WTO members. Developing countries
would allow imports of financial services, particularly banking. In so
doing, they would have to modernize their markets. In return, the developed
countries would reduce farm subsidies. That would boost the growth
of developing countries that were good at producing food. Farm lobbies in the United States and
the European Union doomed
Doha negotiations. They refused to agree to lower subsidies or accept
increased foreign competition. The WTO abandoned the Doha round in July 2008. On December 7, 2013, WTO
representatives agreed to the so-called Bali package. All countries
agreed to streamline customs standards and reduce red tape to expedite
trade flows. Food security is an issue. India wants to subsidize food so
it could stockpile it to distribute in case of famine. Other countries worry
that India may dump the cheap food in the global market to gain market
share. In class exercise Question 1: What
is the primary focus of multilateral trade agreements? a) Commerce treaties among three or more nations b) Commerce treaties between two nations c) Bilateral agreements for economic growth Answer: A Explanation: Multilateral trade
agreements involve commerce treaties among three or more nations to reduce
tariffs and ease import-export processes. Question 2: Why are multilateral agreements
considered more robust than bilateral agreements? a) They are easier to negotiate b) They involve many countries and are difficult
to negotiate c) They have a smaller impact on economic growth Answer: B Explanation: The broad
scope of multilateral agreements involving many countries makes them more
robust. Question 3: What advantage do multilateral
agreements provide for emerging market countries? a) Exclusivity in trade deals b) Most Favored Nation Status and equal
treatment c) Preferential treatment for smaller economies Answer: B Explanation: Multilateral
agreements ensure equal treatment among signatories, benefiting emerging
market countries. Question 4: How do multilateral agreements impact
trade for participants? a) They decrease trade for participants b) They have no impact on trade dynamics c) They increase trade by providing low
tariffs Answer: C Explanation: Participants
in multilateral agreements enjoy low tariffs, making their exports cheaper
and increasing trade. Question 5: Why do countries prefer negotiating
trade deals with more than one country at a time? a) Faster approval process b) Detailed approval process for one agreement
covering many countries at once c) Avoidance of trade negotiations Answer: B Explanation: Negotiating
one agreement covering many countries at once is preferred due to the detailed
approval process. Question 6: What is the significance of emerging
markets becoming stronger in the context of multilateral agreements? a) Creates new affluent customers and benefits the
developed economy over time b) No impact on developed economies c) Weakens the developed economy Answer: A Explanation: Strengthening
emerging markets creates new affluent customers, benefiting the developed
economy over time. Question 7: What is the biggest disadvantage of
multilateral agreements mentioned in the video? a) They are easily understood by the public b) They are complex and time-consuming to
negotiate c) They have a minimal impact on businesses Answer: B Explanation: The
complexity of multilateral agreements makes them difficult and time-consuming
to negotiate. Question 8: Why do negotiations of multilateral
agreements often receive press, controversy, and protests? a) Lack of public interest b) Smooth negotiation process c) Public misunderstanding due to particular trade
details Answer: C Explanation: Public
misunderstanding of trade details leads to press, controversy, and protests. Question 9: What is a common consequence when
trade borders disappear? a) No impact on businesses b) Some companies and regions suffer c) Enhanced business opportunities Answer: B Explanation: When trade
borders disappear, some companies and regions may suffer due to increased
competition. Question 10: Which entities benefit the most from
multilateral agreements, creating a competitive advantage? a) Giant multi-nationals b) Small businesses c) Medium-sized enterprises Answer: A Explanation: Multilateral
agreements give a competitive advantage to giant multi-nationals, which are
familiar with global operations. Question 11: What does the video suggest about the
impact of multilateral agreements on small businesses? a) They gain a competitive advantage b) They experience high unemployment rates c) They become globally competitive Answer: B Explanation: Small
businesses may face challenges and lay off workers due to the competitive
advantage given to larger corporations. Question 12: What is the primary benefit of the
Most Favored Nation Status in multilateral agreements? a) Exclusive trade deals for a single country b) Tariff reductions for developed economies c) Best trading terms a nation can get from a
trading partner Answer: C Explanation: Most Favored
Nation Status confers the best trading terms a nation can get from a trading
partner. Bilateral
Trade By JULIA KAGAN Updated December 21,
2020, Reviewed by TOBY WALTERS, Fact checked by ARIEL COURAGE https://www.investopedia.com/terms/b/bilateral-trade.asp What
are bilateral and
unilateral contracts? (youtube)
In class exercise Question 1: What characterizes a bilateral
contract? A) One promise from the offeror B) Two promises exchanged between parties C) Performance as acceptance Answer: B Explanation: In a
bilateral contract, there are at least two promises exchanged between the
parties. Question 2. What is typical of a unilateral
contract? A) Performance as acceptance B) Two promises exchanged C) Money exchange Answer: A Explanation: In a
unilateral contract, performance serves as acceptance of the offer. What Is Bilateral Trade? Bilateral
trade is the exchange of goods between two nations promoting trade and
investment. The two countries will
reduce or eliminate tariffs, import quotas, export restraints, and other
trade barriers to encourage trade and investment. In the United States, the Office of
Bilateral Trade Affairs minimizes trade deficits through negotiating free
trade agreements with new countries, supporting and improving existing trade
agreements, promoting economic development abroad, and other actions. KEY TAKEAWAYS ·
Bilateral trade
agreements are agreements between countries to promote trade and commerce. ·
They eliminate trade
barriers such as tariffs, import quotas, and export restraints in order to
encourage trade and investment. ·
The main advantage
of bilateral trade agreements is an expansion of the market for a country's
goods through concerted negotiation between two countries. ·
Bilateral trade agreements can also result in the closing
down of smaller companies unable to compete with large multinational
corporations. Understanding Bilateral Trade The goals of bilateral trade
agreements are to expand access between two countries’ markets and increase
their economic growth. Standardized business operations in five general areas
prevent one country from stealing another’s innovative products, dumping
goods at a small cost, or using unfair subsidies. Bilateral
trade agreements standardize regulations, labor standards, and environmental
protections. The
United States has signed bilateral trade agreements with 20 countries,
some of which include Israel, Jordan, Australia, Chile, Singapore, Bahrain,
Morocco, Oman, Peru, Panama, and Colombia. Advantages and Disadvantages of
Bilateral Trade Compared to multilateral trade
agreements, bilateral trade agreements
are negotiated more easily, because only two nations are party to the
agreement. Bilateral trade agreements initiate and reap trade benefits faster
than multilateral agreements. Examples of Bilateral Trade The European Union and the United States have the largest bilateral trade and
investment relationship and enjoy the most integrated economic relationship
in the world. Although overtaken by China in 2020 as the largest trading
partner specifically for goods, when services and investment are taken into
account, the US remains the EU’s largest trading partner by far. The transatlantic relationship is a
key artery of the world economy. Either the EU or the US is the largest trade
and investment partner of almost every other country in the global economy.
Taken together, the economies of both territories account for one third of
global trade in goods and services and close to one third of world GDP in
terms of purchasing power. Trade picture ·
Bilateral trade and
investment support millions of jobs in the EU and the US. Around 9.4 million
people are directly employed. Indirectly, as many as 16 million jobs on both
sides of the Atlantic are supported. ·
The EU-US trade and
investment relationship remains strong despite the economic challenges
related to the Covid-19 pandemic. ·
Transatlantic trade
reached an all-time high of 1.2 trillion euro in 2021, surpassing
pre-pandemic levels by more than 10%. ·
The United States
remains the EU’s number one trading partner in services. Bilateral trade in
services reached a record in 2021 and accounted for more than 500 billion
euro. ·
The size of trade in
services and goods between the EU and the US is matched by their mutual
investments, which are the biggest in the world and which are a substantial
driver of the transatlantic relationship. ·
Total US investment
in the EU is four times higher than in the Asia-Pacific region. EU foreign
direct investment in the US is around 10 times the amount of EU investment in
India and China together. ·
Total investment
includes foreign direct investment, where the EU and the US are each other’s
biggest sources. In 2020, the EU registered €2.1 trillion in outward stock,
and €2.3 trillion in inward stock. ·
The transatlantic
relationship is a key feature of the overall global economy and trade flows.
For most countries, either the EU or the US is the largest trade and
investment partner. In class exercise Question 1:
What is bilateral trade? A) The exchange of goods
between two nations B) The exchange of goods
within a single nation C) The exchange of goods in
a multilateral setting Answer:
A Explanation:
Bilateral trade involves the exchange of goods between two nations. Question 2: What do
bilateral trade agreements aim to achieve? A) Increase trade barriers B) Standardize business
operations C) Encourage competition Answer:
B Explanation:
Bilateral trade agreements aim to standardize business operations and
eliminate trade barriers. Question 3: What is a key
advantage of bilateral trade agreements? A) Slower negotiation
process B) Faster initiation and
benefits C) Increased competition Answer:
B Explanation:
Bilateral trade agreements initiate and reap trade benefits more quickly
compared to multilateral agreements. Question 4: How do bilateral
trade agreements affect smaller companies? A) Promote their growth B) Have no impact C) May lead to closure due
to competition Answer:
C Explanation:
Bilateral trade agreements can result in the closing down of smaller companies
unable to compete with large multinational corporations. Question 5: Which areas do
bilateral trade agreements standardize? A) Regulatory standards,
labor standards, and environmental protections B) Marketing strategies and
pricing C) Technology and innovation Answer:
A Explanation:
Bilateral trade agreements standardize regulations, labor standards, and
environmental protections. Question 6: Which country
has signed bilateral trade agreements with 20 nations, including Israel and
Jordan? A) China B) United States C) European Union Answer:
B Explanation:
The United States has signed bilateral trade agreements with various
countries, including Israel and Jordan. Question 7: How do bilateral
trade and investment support jobs in the EU and the US? A) 9.4 million jobs directly
employed B) No significant impact on
employment C) Decrease in job
opportunities Answer:
A Explanation:
Bilateral trade and investment support around 9.4 million jobs directly
employed in the EU and the US. Question 8: What is a key
feature of the transatlantic relationship in terms of trade and investment
flows? A) Least influential in the
global economy B) Mutual investments being
the smallest in the world C) Either the EU or the US
is the largest trade and investment partner for most countries Answer:
C Explanation:
Either the EU or the US is the largest trade and investment partner for most
countries, making it a key feature of the transatlantic relationship. Homework chapter1-2 (due with first
midterm exam) 1)
What is bilateralism? What is Multilateralism? 2)
Do you advocate for bilateralism or multilateralism as being
more suitable for the U.S. economy? Why
Trade
agreement https://ustr.gov/trade-agreements/free-trade-agreements https://www.trade.gov/us-free-trade-agreement-partner-countries 3)
Watch Hear Trump hint at what to
expect in his second term (CNN). ·
What
are your thoughts on the proposed policies outlined in Trump's second-term agenda,
particularly focusing on trade, energy, regulation, education, and
environmental issues? ·
How
do you think these policies might impact the United States and its global
relations, and what aspects do you find most noteworthy or concerning? |
Rust Belt https://www.investopedia.com/terms/r/rust-belt.asp (FYI) By JAMES CHEN Updated Aug 25, 2020 What happened to the Rust
Belt? (youtube)
In class exercise Question 1: What term was coined in the 1980s to describe the former
industrial heartland of America? A) Steel Belt B) Rust Belt C)
Manufacturing Zone Answer: B Explanation: The term
"Rust Belt" came into use in the 1980s to describe the declining
industrial region. Question
2: What event largely attributed to the upset in the Rust Belt during the
2016 election? A)
Hillary Clinton's extensive campaigning B)
Donald Trump's refusal to visit the region C)
Hillary Clinton's reluctance to campaign in the Rust Belt Answer: C Explanation: The upset in
the Rust Belt during the 2016 election is largely attributed to Hillary Clinton's
refusal to campaign there. Question
3: What region was once referred to as the industrial heartland of America? A)
West Coast B)
Midwest C)
Northeast Answer: B Explanation: The Midwest was
once referred to as the industrial heartland of America. Question
4: What contributed to the decline of American manufacturing in the Midwest? A)
Labor costs and increased competition B)
Increased demand for American goods C)
Decreased foreign trade ties Answer: A Explanation: The decline in
the Midwest was fueled by labor costs and increased competition. Question
5: What fueled the post-war boom for the U.S.? A)
European economic decline B)
Increased domestic manufacturing C)
The Marshall Plan Answer: C Explanation: The Marshall Plan
fueled a post-war economic boom for the U.S. by aiding European
reconstruction. Question
6: Which region faced competition from East Asia during the Cold War? A)
South America B)
Middle East C)
Midwest Answer: C Explanation: The Midwest
faced competition from East Asia, including Japan, during the Cold War. Question
7: What technological advancement contributed to job loss in the Midwest? A)
Increased manual labor B)
Automation C)
Traditional manufacturing methods Answer: B Explanation: Increased use
of automation reduced the number of laborers in manufacturing. Question
8: What term describes the region challenged by Japan in the auto and
electronics industries? A)
Silicon Valley B)
Manufacturing Hub C)
Rust Belt Answer: C Explanation: Japan challenged
the Rust Belt in the auto and electronics industries. What
Is the Rust Belt? The Rust Belt is a colloquial term used to
describe the geographic region stretching from New York through the Midwest
that was once dominated by the coal industry, steel production,
and manufacturing. The Rust Belt became an industrial hub due to its proximity to
the Great Lakes, canals, and rivers, which allowed companies to
access raw materials and ship out finished products. The region received the name Rust Belt in the
late 1970s, after a sharp decline in industrial work left many
factories abandoned and desolate, causing increased rust from exposure to the
elements. It is also referred to as the Manufacturing Belt and the
Factory Belt. KEY TAKEAWAYS
Understanding
the Rust Belt The term Rust Belt is often used in a derogatory sense to
describe parts of the country that have seen an economic decline—typically
very drastic. The rust belt region
represents the deindustrialization of an area, which is often
accompanied by fewer high-paying jobs and high poverty rates. The result
has been a change in the urban landscape as the local population has moved to
other areas of the country in search of work. Although there is no definitive boundary, the states that are
considered in the Rust Belt–at least partly–include the following:
There are other states in the U.S. that have also experienced
declines in manufacturing, such as states in the deep south, but they are not
usually considered part of the Rust Belt. The region was home to some of
America's most prominent industries, such as steel production
and automobile manufacturing. Once recognized as the industrial
heartland, the region has experienced a sharp downturn in industrial activity
from the increased cost of domestic labor, competition from overseas,
technology advancements replacing workers, and the capital
intensive nature of manufacturing. Poverty in the Rust Belt Blue-collar jobs have increasingly moved
overseas, forcing local governments to rethink the type of manufacturing
businesses that can succeed in the area. While some cities managed to adopt new technologies, others
still struggle with rising poverty levels and declining populations. Below are the poverty rates from the U.S. Census
Bureau as of 2018 for each of the Rust Belt states listed above. Poverty Rates in the Rust Belt. There are other U.S. states that have high poverty rates, such
as Kentucky (16.9%), Louisiana (18.6%), and Alabama (16.8%). However, the
rust belt states have–at a minimum–a double-digit percentage of their
population in poverty. History
of the Rust Belt Before being known as the Rust Belt, the area was generally
known as the country's Factory, Steel, or Manufacturing Belt. This area, once
a booming hub of economic activity, represented a great portion of U.S.
industrial growth and development. The natural resources that were found in the area led to its
prosperity—namely coal and iron ore—along with labor and ready access to transport
by available waterways. This led to the rise in coal and steel plants, which
later spawned the weapons, automotive, and auto parts industries. People
seeking employment began moving to the area, which was dominated by both the
coal and steel industries, changing the overall landscape of the region. But that began to change between the 1950s and 1970s. Many
manufacturers were still using expensive and outdated equipment and
machinery and were saddled with the high costs of domestic labor and materials.
To compensate, a good portion of them began looking elsewhere for cheaper
steel and labor—namely from foreign sources—which would ultimately lead to
the collapse of the region. There is no definitive boundary for the Rust
Belt, but it generally includes the area from New York through the Midwest. Decline
of the Rust Belt Most research suggests the Rust Belt started to falter in the
late 1970s, but the decline may have started earlier, notably in the 1950s,
when the region's dominant industries faced minimal competition.
Powerful labor unions in the automotive and steel manufacturing
sectors ensured labor competition stayed to a minimum. As a result, many of
the established companies had very little incentive to innovate or expand
productivity. This came back to haunt the region when the United States
opened trade overseas and shifted manufacturing production to the south. By the 1980s, the Rust Belt faced competitive
pressure—domestically and overseas—and had to ratchet down wages and prices. Operating in
a monopolistic fashion for an extended period of time played an
instrumental role in the downfall of the Rust Belt. This shows that
competitive pressure in productivity and labor markets are important to
incentivize firms to innovate. However, when those incentives are weak,
it can drive resources to more prosperous regions of the country. The region's population also showed a rapid
decline. What was once a hub
for immigrants from the rest of the country and abroad, led to an exodus of
people out of the area. Thousands of
well-paying blue-collar jobs were eliminated, forcing people to move away in
search of employment and better living conditions. Politics
and the Rust Belt The term Rust Belt is generally attributed to Walter Mondale, who
referred to this part of the country when he was the Democratic presidential
candidate in 1984. Attacking President Ronald Reagan, Mondale claimed his
opponent's policies were ruining what he called the Rust Bowl. He was
misquoted by the media as saying the rust belt, and the term stuck. Since
then, the term has consistently been used to describe the area's economic
decline. From a policy perspective, addressing the specific needs of the
Rust Belt states was a political imperative for both parties during the 2016
election. Many believe the national
government can find a solution to help this failing region succeed again. Trump's second-term agenda: revenge, trade
wars, mass deportations Reuters December 27, 202311:22 AM EST Updated 19 days
ago WASHINGTON, Dec 27 (Reuters) - Republican Donald Trump is planning to
punish his political enemies, deport millions of migrants and reshape global
trade with pricey tariffs if he wins a second White House term in the
November 2024 presidential election, according to his campaign and media
reports. Here is a look at some of the policies Trump
has pledged to institute: TRADE Trump has floated the idea of a 10% tariff on all goods imported
into the United States, a move he says would eliminate the trade
deficit but one critics say would lead to higher prices for American
consumers and global economic instability. He has also said he should have the authority to set higher
tariffs on countries that have established tariffs on American imports. Trump, in particular, has targeted China. He proposes phasing out
Chinese imports of goods such as electronics, steel and pharmaceuticals over
four years. He seeks to prohibit Chinese companies from owning U.S.
infrastructure in the energy and tech sectors. FEDERAL BUREAUCRACY Trump would seek to decimate what he terms the “deep state” –
career federal employees he says are clandestinely pursuing their own agendas
– through an executive order that would reclassify thousands of workers to
enable them to be fired. That would likely be challenged in court. He has vowed to fire what he terms
"corrupt" actors in national security positions and "root
out" his political opponents. Trump would require every federal employee to
pass a new civil service test of his own creation. His team is also vetting scores
of potential hires who could be counted on to implement his policies or
perhaps investigate Trump’s political enemies. He would crack down on federal whistleblowers who are typically
shielded by law and would institute an independent body to "monitor"
U.S. intelligence agencies. Trump also would seek to bring independent regulatory agencies
such as the Federal Communications Commission and the Federal Trade
Commission under presidential control. ENERGY Trump has vowed to increase U.S. production of fossil fuels by
easing the permitting process for drilling on federal land and would
encourage new natural gas pipelines. He has said he will pull the United States out of the Paris
Climate Accords, a framework for reducing global greenhouse gas emissions and
would support increased nuclear energy production. He would also roll back
the Biden White House’s electric-vehicle mandates and other policies aimed at
reducing auto emissions. ECONOMY Along with his trade and energy agendas, Trump has promised to
slash federal regulations he argues limit job creation. He and his economic
team have discussed a further round of individual and corporate tax cuts
beyond those enacted in his first term. He said as president he would
pressure the Federal Reserve to lower interest rates. Trump is proposing the government establish
so-called "freedom cities" on federal land that he says would spur
job growth and technological innovation. IMMIGRATION Trump has vowed to reinstate first-term
policies targeting illegal border crossings, roll back Biden's pro-immigrant
measures and forge ahead with sweeping new restrictions. Trump has pledged to limit access to asylum at
the U.S.-Mexico border and embark on the biggest deportation effort in
American history, which would likely trigger legal challenges and opposition
from Democrats in Congress. Trump has said he would seek to end automatic
citizenship for children born to immigrants, a move that would run against
the long-running interpretation of the U.S. Constitution. ABORTION Trump appointed three justices to the U.S.
Supreme Court who were part of the majority that did away with constitutional
protection for abortion. He likely would continue to appoint federal judges
who would uphold abortion limits. At the same time, he has said a federal
abortion ban is unnecessary, and that the issue should be resolved on a
state-by-state basis. He has argued a six-week ban favored by some Republicans
is overly harsh and that any legislation should include exceptions for rape,
incest and the health of the mother. FOREIGN AFFAIRS Trump has been critical of the U.S.'s support for Ukraine in its
war with Russia and has said he could end the war in 24 hours if elected. He has argued that Europe should reimburse the U.S. for
ammunition used in the conflict. Trump
has also said that under his presidency, America would fundamentally rethink
"NATO's purpose and NATO's mission." He has supported Israel in its fight against Hamas despite
initially criticizing its leaders after the October attacks. On the campaign trail,
he has also floated sending armed forces into Mexico to battle drug cartels
and slapping expansive tariffs on friends and foes alike. EDUCATION Trump has pledged to require America’s colleges and universities to “defend American
tradition and Western civilization” and purge them of diversity programs.
He said he would direct the Justice Department to pursue civil rights cases
against schools that engage in racial discrimination. On the K-12 level, Trump would support programs allowing parents
to use public funds for private or religious instruction. CRIME Trump has pledged to appoint U.S. attorneys
who would launch probes into liberal prosecutors and district attorneys he
says are failing to contain crime in America's cities. He has said he would institute the death
penalty for human traffickers and drug dealers. He also has suggested that
looters of retail stores could be "shot" while on site. HOMELESSNESS Trump has vowed to ban so-called “urban camps”
from America’s cities and require homeless people to accept drug treatment or
face arrest. He said he would then "open large parcels
of inexpensive land" where tent cities would be relocated and staffed
with doctors, drug counselors and mental health experts. Reporting by James Oliphant; Additional
reporting by Ted Hesson; Editing by Ross Colvin and Jonathan Oatis In class exercise Question 1. Trade Policies - What is the proposed tariff
percentage on all goods imported into the United States? A) 5% B) 10% C) 15% Answer:
B Explanation: Trump suggests a 10% tariff to eliminate
the trade deficit. Question 2. Federal Bureaucracy - What executive order does Trump
plan to use to target career federal employees? A) Executive Order on National Security B) Executive Order on Tariffs C) Executive Order on Civil Service Answer:
C Explanation: Trump aims to reclassify workers to enable
their dismissal. Question 3. Energy Policies - What does Trump propose to do
with U.S. participation in the Paris Climate Accords? A) Increase commitment B) Maintain current commitment C) Withdraw Answer:
C Explanation: Trump plans to pull the U.S. out of the
Paris Climate Accords. Question 4. Economic Measures - In addition to tax cuts, what
does Trump propose to pressure the Federal Reserve to do? A) Raise interest rates B) Maintain interest rates C) Lower interest rates Answer:
C Explanation: Trump wants the Federal Reserve to lower
interest rates. Question 5. Foreign Affairs - How does Trump view the U.S.'s
support for Ukraine in its war with Russia? A) Supportive B) Critical C) Neutral Answer:
B Explanation: Trump has been critical of U.S. support for
Ukraine. Question 6. Education Policies - What does Trump want colleges
and universities to defend and purge? A) American tradition and Western civilization B) Cultural diversity C) Scientific innovation Answer:
A Explanation: Trump aims to defend these values and purge
diversity programs. Question 7. Trade with China - Which of the following goods
does Trump propose to phase out in Chinese imports over four years? A) Textiles B) Electronics, steel, and pharmaceuticals C) Agricultural products Answer:
B Explanation: Trump aims to phase out these specific
Chinese imports. Question 8. Regulatory Agencies - Which agencies does Trump
aim to bring under presidential control? A) Environmental Protection Agency (EPA) B) Federal Communications Commission (FCC) and Federal Trade
Commission (FTC) C) Department of Education Answer:
B Explanation: Trump wants these independent regulatory
agencies under presidential control.
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Chapter 2 Let’s watch this video together. Imports, Exports, and Exchange Rates: Crash Course
Economics #15 (youtube) In class exercise 1.
Who is the world's largest importer? A. China B. Canada C. United States Answer: C. 2.
Which country is the largest trading
partner of the United States? A. China B. Mexico C. Canada Answer: C. Explanation: Despite the common perception of China, the episode reveals that Canada is the largest trading partner of the United States. 3.
What is the annual difference between a
country's exports and imports called? A. Net exports B. Trade surplus C. Trade deficit Answer: A. Explanation: Net exports represent the annual difference between a country's exports and imports. 4.
What is the role of exchange rates in
international trade? A. Influencing trade balances B. Determining political stability C. Regulating labor costs Answer: A. Explanation: Exchange rates impact the affordability of imports and exports, influencing trade balances. 5.
Which organization is mentioned as working
to eradicate protectionism in international trade? A. United Nations B. World Trade Organization (WTO) C. International Monetary Fund (IMF) Answer: B. Explanation: The WTO is mentioned as an organization working to eradicate protectionism in international trade. 6.
What is the main purpose of the financial
account in the balance of payments? A. Recording the sale and purchase of goods B. Tracking financial assets' transactions C. Documenting foreign aid and donations Answer: B. Explanation: The financial account records transactions related to financial assets, such as stocks and bonds. 7.
Why did some critics argue against NAFTA
(North American Free Trade Agreement)? A. It increased trade deficits B. It created manufacturing jobs C. It favored rich countries Answer: A. Explanation: Critics argued that NAFTA significantly increased US trade deficits. 8.
Why do some countries choose to peg their
currency to another currency? A. To increase exchange rates B. To maintain stability in exchange rates C. To encourage imports Answer: B. Explanation: Some countries peg their currency to another to keep the exchange rate in a certain range and maintain stability. 9.
What does the episode emphasize as the
overall impact of international trade on the global standard of living? A. It has no impact on the global standard of living B. It always improves the global standard of living C. It improves the global standard of living, despite individual challenges Answer: C. Explanation: The episode concludes that, in the aggregate, international trade improves the global standard of living, even though there may be individual challenges. 10. What does the episode suggest
about protectionist policies like high tariffs on imports? A. They always benefit the economy B. They have no impact on the economy C. They usually hurt the economy Answer: C. Explanation: Protectionist policies, like high tariffs, are mentioned as usually hurting the economy more than helping.
Topic 1- What is BOP? The balance of payment of a country contains two
accounts: current and capital. The current account records exports and imports of goods and services
as well as unilateral transfers, whereas the capital account records purchase and sale transactions of foreign
assets and liabilities during a particular year. Summary: Current Account: ·
Definition: The
current account represents the country's transactions in goods, services,
income, and current transfers with the rest of the world. ·
Components: A. Trade Balance: The difference between exports and imports
of goods. B. Services: Transactions related to services (e.g.,
tourism, transportation). C. Income: Receipts and payments of interest, dividends, and
wages. D. Current Transfers: Gifts, aids, and remittances. Capital Account: ·
Definition: The
capital account tracks capital transfers and the acquisition or disposal of
non-financial assets. Now includes financial account. ·
Components: A. Capital Transfers: Non-financial transfers (e.g., debt
forgiveness) and financial transfers. B. Acquisition/Disposal of Non-Financial Assets: Sale or
purchase of non-financial assets, such as patents, goodwill, copy rights,
etc, and financial assets, such as FDI, changes in reserves, portfolio
investment, and financial derivative. Balance of Payments (BoP): ·
Definition: The BoP
is a comprehensive record of a country's economic transactions with the rest
of the world over a specific period. ·
Equation: BoP = Current Account + Capital Account ·
Significance: It
indicates whether a country has a surplus or deficit in its transactions with
the rest of the world. Summary: ·
Current Account: Records
day-to-day transactions, including trade, services, income, and transfers. ·
Capital Account:
Deals with transfers of non-financial and financial assets and capital
transfers. ·
Balance of Payments:
The overall record combining the Current and Capital Accounts, reflecting a
country's economic relationship with the world. Part I
- What is the current account? From
khan academy: Current vs. Capital Accounts: What's the
Difference? By
THE INVESTOPEDIA TEAM, Updated June
29, 2021, Reviewed by ROBERT C. KELLY Current
vs. Capital Accounts: An Overview The
current and capital accounts represent two halves of a nation's balance of
payments. The current account
represents a country's net income over a period of time, while the capital
account records the net change of assets and liabilities during a particular
year. In
economic terms, the current account deals with the receipt and payment in
cash as well as non-capital items, while the capital account reflects sources
and utilization of capital. The sum of
the current account and capital account reflected in the balance of payments
will always be zero. Any surplus or deficit in the current account is matched
and canceled out by an equal surplus or deficit in the capital account. KEY
TAKEAWAYS ·
The current and
capital accounts are two components of a nation's balance of payments. ·
The current account
is the difference between a country's savings and investments. ·
A country's capital
account records the net change of assets and liabilities during a certain
period of time. Current Account The
current account deals with a country's short-term transactions or the
difference between its savings and investments. These are also referred to as
actual transactions (as they have a real impact on income), output and
employment levels through the movement of goods and services in the economy. The current account consists of visible trade
(export and import of goods), invisible trade (export and import of services),
unilateral transfers, and investment income (income from factors such as land
or foreign shares). The credit and debit of foreign exchange from these
transactions are also recorded in the balance of the current account. The
resulting balance of the current account is approximated as the sum total of
the balance of trade. Current Account vs. Capital Account Transactions
are recorded in the current account in the following ways: Exports are noted as credits in the balance
of payments Imports are recorded as debits in the
balance of payments The
current account gives economists and other analysts an idea of how the
country is faring economically. The
difference between exports and imports, or the trade balance, will determine
whether a country's current balance is positive or negative. When it is
positive, the current account has a surplus, making the country a "net
lender" to the rest of the world. A deficit means the current account
balance is negative. In this case, that country is considered a net borrower. If imports
decline and exports increase to stronger economies during a recession, the
country's current account deficit drops. But if exports stagnate as imports
grow when the economy grows, the current account deficit grows. Capital Account The capital account is a record of the
inflows and outflows of capital that directly affect a nation’s foreign
assets and liabilities. It is concerned
with all international trade transactions between citizens of one country and
those in other countries. The
components of the capital account include foreign investment and loans,
banking, and other forms of capital, as well as monetary movements or changes
in the foreign exchange reserve. The capital account flow reflects factors
such as commercial borrowings, banking, investments, loans, and capital. A surplus in the capital account means
there is an inflow of money into the country, while a deficit indicates money
moving out of the country. In this case,
the country may be increasing its foreign holdings. In
other words, the capital account is concerned with payments of debts and
claims, regardless of the time period. The balance of the capital account
also includes all items reflecting changes in stocks. The
International Monetary Fund divides capital account into two categories: The
financial account and the capital account. The term capital account is also used in accounting. It
is a general ledger account used to record the contributed capital of
corporate owners as well as their retained earnings. These balances are
reported in a balance sheet's shareholder's equity section. Balance of payments: Current account
(video, Khan academy) In class
exercise 1. What is the focus of the current account in the balance
of payments? A)
Imports and exports B)
Changes in ownership
of assets C) Net
transfers Answer: A Explanation: The current account focuses on
trade, including imports and exports. 2.
What is the result if the current account
calculation shows a positive number? A) Current
account surplus B) Trade
deficit C) Net
transfers deficit Answer: A Explanation: A positive current account indicates
a surplus. 3.
What is the primary reason for the U.S.
running a current account deficit in this scenario? A) High net
transfers B) Excessive
exports C) Trade
deficit and income payments to foreign-owned assets Answer: C Explanation: The U.S. runs a deficit due to
a trade deficit and payments on foreign-owned assets. 4.
Which factor indicates an outflow of
currency from the U.S.? A) Exports B) Income on
U.S. assets abroad C) Net
transfers deficit Answer: C Explanation: Net transfers deficit represents an
outflow of currency. 5.
What is the primary focus of the current
account in a nation's balance of payments? A) Changes in
foreign assets and liabilities B) Net change
of assets and liabilities C) Net income
over a period of time Answer: C Explanation: The current account represents
a country's net income over a period of time. 6.
How is the balance of the current account
and capital account related in the balance of payments? A) They are
independent and unrelated B) Their sum
is always zero C) Capital account
surplus cancels out current account deficit Answer: B Explanation: The sum of the current account
and capital account in the balance of payments is always zero. 7.
What are components of the current account? A) Visible
trade, invisible trade, unilateral transfers, and investment income B) Foreign
investments and loans C) Monetary
movements and changes in foreign exchange reserves Answer: A Explanation: Components of the current
account include visible trade, invisible trade, unilateral transfers, and investment
income. 8.
How are exports and imports recorded in the
balance of payments under the current account? A) Both are
recorded as debits B) Exports are
credits, and imports are debits C) Both are
recorded as credits Answer: B Explanation: Exports are noted as credits,
and imports are recorded as debits in the balance of payments. 9.
What does a positive trade balance in the
current account indicate? A) Current
account deficit B) Net
borrower status C) Current
account surplus Answer: C Explanation: A positive trade balance
indicates a current account surplus. 10.
What does a surplus in the capital account
represent? A) Inflow of
money into the country B) Net
borrower status C) Outflow of
money from the country Answer: A Explanation: A surplus in the capital
account indicates an inflow of money into the country. 11.
What does a deficit in the capital account
signify? A) Inflow of
money into the country B) Outflow of
money from the country C) Balanced
capital account Answer: B Explanation: A deficit in the capital
account signifies an outflow of money from the country. 12.
How does the capital account differ from
the current account in terms of the time period considered? A) Capital
account focuses on short-term transactions B) Both
accounts consider the same time period C) Capital
account is concerned with long-term changes Answer: C Explanation: The capital account is
concerned with long-term changes in assets and liabilities. 13. What
components does the capital account include? A) Foreign investments
and loans B) Changes in
stocks C) Monetary
movements and changes in reserves Answer: A Explanation: Components of the capital
account include foreign investments and loans. 14. How is the
balance of the capital account related to surplus and deficit? A) Surplus
indicates a deficit in the capital account B) Surplus
indicates an inflow of money into the country C) Deficit
indicates a current account surplus Answer: B Explanation: Surplus indicates an inflow of
money into the country. 15. How are deficits
and surpluses balanced in the balance of payments? A) Surplus in
the current account balances deficit in the capital account B) Equal
surpluses in both accounts C) Equal
deficits in both accounts Answer: A Explanation: Surplus in the current account
balances deficit in the capital account. 16. What does
a current account deficit imply about a country's economic status? A) Net lender
status B) Economic
recession C) Net
borrower status Answer: C Explanation: A current account deficit
implies that the country is a net borrower. 17. What is
the relationship between the balance of trade and the current account? A) They are
independent B) Balance of
trade is a subset of the current account C) Current
account is a subset of the balance of trade Answer: B Explanation: The resulting balance of the
current account is approximated as the sum total of the balance of trade. 18. How are
income receipts from factors like land or foreign shares accounted for in the
current account? A) As credits B) As debits C) As net
transfers Answer: A Explanation: Income receipts from factors
like land or foreign shares are accounted for as credits in the current
account. 19. What determines
whether a country is a net lender or net borrower based on the current
account? A) Net income
over a short period B) Difference
between exports and imports C) Balance of
trade Answer: B Explanation: The difference between exports
and imports determines whether a country is a net lender or net borrower
based on the current account. 20. How is a
deficit in the current account balanced in the balance of payments? A) With a
surplus in the capital account B) By
increasing net transfers C) By
increasing exports Answer: A Explanation: A deficit in the current
account is matched and canceled out by a surplus in the capital account. 21. What does
a capital account deficit indicate? A) Inflow of
money into the country B) Outflow of
money from the country C) Balanced
capital account Answer: B Explanation: A capital account deficit
indicates an outflow of money from the country. https://www.bea.gov/data/intl-trade-investment/international-transactions
The U.S.
current-account deficit narrowed by
$16.5 billion, or 7.6 percent, to $200.3 billion in the third quarter of 2023,
according to statistics released today by the U.S. Bureau of Economic
Analysis. The revised second-quarter deficit was $216.8 billion. The
third-quarter deficit was 2.9 percent of current-dollar gross domestic
product, down from 3.2 percent in the second quarter. https://www.bea.gov/sites/default/files/2023-12/trans323.pdf • ·
Exports of goods increased $19.1 billion to $516.4 billion,
and imports of goods increased $4.6 billion to $777.4 billion. The increases
in both exports and imports reflected increases in most major categories. The
increase in exports was led by industrial supplies and materials, primarily
petroleum and products. The increase in imports was led by automotive vehicles,
parts, and engines, primarily passenger cars and other parts and accessories.
Partly offsetting this increase was a decrease in imports of nonmonetary
gold. Trade in
services ·
Exports of services increased $2.7 billion to $252.2 billion, reflecting
an increase in travel, mainly other personal travel, that was partly offset
by a decrease in technical, trade-related, and other business services, a
subcategory of the broader other business services category as presented in
table 3. Imports of services decreased $1.9 billion to $176.0 billion,
reflecting a decrease in transport, mostly sea freight transport. Primary
income ·
Receipts of primary income increased $11.8 billion to $362.1 billion,
and payments of primary income increased $14.0 billion to $332.1 billion. The
increases in both receipts and payments reflected increases in most major
categories. The increase in receipts was led by direct investment income,
mainly earnings. The increase in payments was led by other investment income,
mostly interest on loans and deposits. Secondary
income Receipts of
secondary income decreased $0.7 billion to $45.1 billion, reflecting a
decrease in general government transfers, mostly fines and penalties.
Payments of secondary income decreased $0.3 billion to $90.7 billion,
reflecting a decrease in general government transfers, mainly international
cooperation, that was mostly offset by an increase in private transfers, led
by fines and penalties. Capital-Account
Transactions ·
Capital-transfer receipts increased $10 million to $18
million. Capital-transfer payments decreased $0.6 billion to $2.1 billion,
reflecting a decrease in infrastructure grants. |