ECS4865
ASSIGNMENT 2 2024
UNIQUE NO.
DUE DATE: 3 SEPTEMBER 2024
, ECS4865
Assignment 2 2024
DUE DATE: 3 September 2024
Advanced International Economics
Section A: Short Question
1. High tariffs and quotas can lead to trade wars between nations. Evaluate
the validity of this statement.
When countries impose high tariffs or quotas, they make imports more expensive
and limit the quantity of goods entering their markets. This often leads to
retaliation from other countries, resulting in a trade war. Such conflicts can
escalate, harming global trade and economic relations.
2. What are the effects of export subsidies and tariffs on producers and
consumers?
Export subsidies help producers by making their products cheaper for foreign
buyers, boosting sales and market share. However, they can lead to higher
prices for domestic consumers. Tariffs, on the other hand, protect local producers
by making imported goods more expensive, but this often raises prices for
consumers as well.
3. What is the assumption of the imperfect capital market justification for
infant industry promotion?
The imperfect capital market assumption suggests that new industries in
developing countries struggle to access affordable funding due to market
imperfections. To support these industries, governments might offer protection or
financial assistance, helping them grow until they can compete on their own.
4. What is the main reason that governments sometimes choose to devalue
their currencies?
Governments often devalue their currencies to make their exports cheaper and
more competitive abroad. This can boost export sales and improve the trade
ASSIGNMENT 2 2024
UNIQUE NO.
DUE DATE: 3 SEPTEMBER 2024
, ECS4865
Assignment 2 2024
DUE DATE: 3 September 2024
Advanced International Economics
Section A: Short Question
1. High tariffs and quotas can lead to trade wars between nations. Evaluate
the validity of this statement.
When countries impose high tariffs or quotas, they make imports more expensive
and limit the quantity of goods entering their markets. This often leads to
retaliation from other countries, resulting in a trade war. Such conflicts can
escalate, harming global trade and economic relations.
2. What are the effects of export subsidies and tariffs on producers and
consumers?
Export subsidies help producers by making their products cheaper for foreign
buyers, boosting sales and market share. However, they can lead to higher
prices for domestic consumers. Tariffs, on the other hand, protect local producers
by making imported goods more expensive, but this often raises prices for
consumers as well.
3. What is the assumption of the imperfect capital market justification for
infant industry promotion?
The imperfect capital market assumption suggests that new industries in
developing countries struggle to access affordable funding due to market
imperfections. To support these industries, governments might offer protection or
financial assistance, helping them grow until they can compete on their own.
4. What is the main reason that governments sometimes choose to devalue
their currencies?
Governments often devalue their currencies to make their exports cheaper and
more competitive abroad. This can boost export sales and improve the trade
