Friday, 5 January 2018

International Relations

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International Relations



Question. 1. The overall success of liberal economics is due to the substantial gains that can be realized through trade. Discuss Comparative Advantage.

Answer: Integration into the world economy has proven a powerful means for countries to promote economic growth, development, and poverty reduction. Over the past 20 years, the growth of world trade has averaged 6 percent per year, twice as fast as world output. But trade has been an engine of growth for much longer. Since 1947, when the General Agreement on Tariffs and Trade (GATT) was created, the world trading system has benefited from eight rounds of multilateral trade liberalization, as well as from unilateral and regional liberalization. Indeed, the last of these eight rounds (the so-called "Uruguay Round" completed in 1994) led to the establishment of the World Trade Organization to help administer the growing body of multilateral trade agreements.

The resulting integration of the world economy has raised living standards around the world. Most developing countries have shared in this prosperity; in some, incomes have risen dramatically. As a group, developing countries have become much more important in world trade—they now account for one-third of world trade, up from about a quarter in the early 1970s. Many developing countries have substantially increased their exports of manufactures and services relative to traditional commodity exports: manufactures have risen to 80 percent of developing country exports. Moreover, trade between developing countries has grown rapidly, with 40 percent of their exports now going to other developing countries.

However, the progress of integration has been uneven in recent decades. Progress has been very impressive for a number of developing



Question. 2.Capital from the global North moves to the South and potentially spurs growth there in several forms—foreign investment, debt, and foreign aid. Discuss these capital flows from North to South.


Answer: There are many macroeconomic consequences of demographic differences between lower- income, less developed countries (the “South”) and higher-income developed countries (the “North”). There are some likely implications in the two regions for aggregate saving- investment imbalances, exchange rates, and the resulting net capital flows between North and South. There is a presence of asymmetric demographic transitions among Southern and Northern economies suggests that the North can run a current-account surplus sizable in relation to the Northern economy, thereby transferring large net amounts of financial capital to the South. The optimistic view is a plausible summary of demographic influences Dear students get fully solved assignments
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