1. Free trade is one of the basic principles in economics that almost every economist agrees on. What is the basis for this belief? How do economists rationalize free trade in terms of their economic models? Give examples wherever relevant.
2. A majority of countries in the world now belong to the World Trade Organization (WTO), and yet many countries (and WTO members) are also members of free trade agreements. Give some examples of how the WTO promotes trade liberalization, and give some examples of free trade agreements. Is there a contradiction between multilateral trade liberalization and free trade projects? Which do you think is best for the promotion of trade liberalization, and why?
3. What are the welfare effects of tariffs and quotas? Show this diagrammatically, and distinguish between the effects of tariffs and quotas for the home country and for the foreign country.
4. The balance of payments is the most important set of accounts that economists look at to assess the magnitude and types of interaction that countries have with the rest of the world. Detail how the balance of payments is structured and give some examples of how transactions are recorded in the balance of payments accounts. Why are large imbalances on the balance of payments a concern? Give examples.
5. What different exchange rate regimes are available for countries to adopt? Describe the full range of regimes, and their different characteristics. Specify which regimes are most suitable for developing countries and developed countries, and give examples where relevant.
6. What are the steps of economic integration? Describe where NAFTA and the EU are in terms of these steps, and the challenges in moving forward in each case to accomplish deeper economic integration for each of these regional integration agreements. In your view, how might some of these challenges be overcome?
