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International Economics 8th Edition Appleyard Solutions Manual
International Economics 8th Edition Appleyard Solutions Manual
International Economics 8th Edition Appleyard Solutions Manual
CHAPTER 2
EARLY TRADE THEORIES:
MERCANTILISM AND THE TRANSITION TO THE CLASSICAL
WORLD OF DAVID RICARDO
Learning Objectives:
I. Outline
Introduction
- The Oracle in the 21st Century
Mercantilism
- The Mercantilist Economic System
- The Role of Government
- Mercantilism and Domestic Economic Policy
The Challenge to Mercantilism by Early Classical Writers
- David Hume – The Price-Specie-Flow Mechanism
- Adam Smith and the Invisible Hand
Summary
The purpose of this chapter is to trace out some of the early ideas regarding the basis for
international trade and the distribution of the benefits to be gained from trade. The chapter not
only provides some historical perspective to trade theory, but it also makes clear why certain
contemporary protectionist attitudes can be seen as being based in a Mercantilist view of the
world.
2-1
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A. It is important to focus on the principal tenets of the Mercantilist system and then to
examine the policy positions that follow logically. This provides a good background for
evaluating various trade policy positions later in the book.
B. We feel that this is an excellent time to introduce the labor theory of value. It is a good
opportunity to help the student begin thinking in relative terms. It is therefore important that the
relative nature of this concept is clear in the students’ minds.
C. Once the Mercantilist position is laid out and the economic policy implications discussed,
one can examine how Hume’s price-specie-flow mechanism and Smith’s ideas of the mutual
gains from trade based on absolute advantage contributed to the decline of the Mercantilist way
of thinking.
D. Discussing the price-specie-flow mechanism at this point gives the student an early
insight into the macro aspect of international trade that often gets short shrift when the micro
focus of Classical comparative advantage is introduced.
Because wealth was viewed in terms of holdings of precious metals, the objective of
economic activity and policy was to foster increased holdings of specie. Mercantilists believed
that individuals pursuing their own self interest would not accomplish this objective and that,
consequently, economic activity had to be closely regulated and supervised.
3. The paradox of Mercantilism is that wealthy countries would contain large numbers of
very poor people. A second paradox is that wealthy countries had to spend great amounts of
specie to protect their holdings of specie. Wages were kept low (at institutional subsistence
levels) to reduce labor costs, and families were encouraged to have children through various
taxes and subsidies. These actions contributed to a very large poor working class.
2-2
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 02 - Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo
If the demand for traded goods were price inelastic, the movement of gold and prices
would worsen trade balances, not correct them. This would be destabilizing, not stabilizing.
6. The United States has an absolute advantage in the production of wheat (3 hrs./unit < 4
hrs./unit) and the United Kingdom has an absolute advantage in clothing (4 hrs./unit < 9
hrs./unit). The United States would gain at the barter price of 1C:2W (1W:0.5C) since it only
gets 0.33C for 1W in autarky. Similarly, the United Kingdom would benefit because it takes
only 0.5C to obtain a unit of wheat with trade instead of 1C in autarky.
7. (a) In autarky the United Kingdom would produce 75 units of clothing (300 labor hours/4
hrs.) and 50 units of wheat (200 labor hours/4 hrs.).
(b) If the United Kingdom allocates all of its labor to clothing production, it will produce
125 units of clothing (500 total labor hours/4 hrs.). United Kingdom consumption of clothing
with trade will be the difference between domestic production and exports, i.e., 85 units of cloth.
United Kingdom consumption of wheat will be equal to the 80 units of wheat imports it receives
for its 40 units of clothing exports [(40 units of exports) (2W/1C)]. Thus, with trade, United
Kingdom consumption of clothing increased from 75 to 85 units and its consumption of wheat
increased from 50 units to 80 units.
8. (a) In autarky United States wheat production will be 110 units (330 labor hrs./3 hrs.),
and cloth production will be 30 units (270 labor hours/9 hrs.).
(b) With trade, the United States will consume 120 units of wheat (200 units of
production less the 80 units of exports) and 40 units of cloth imports. Consequently, with trade,
U.S. consumption of wheat has risen from 110 to 120 units and its consumption of cloth has
risen from 30 to 40 units.
2-3
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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Seuraavana päivänä hän saapui kirjoineen ja matkatavaroineen.
Omituinen ajankohta vuoristo-oleskelulle, huomautti muulinajaja, joka
kuletti tavaroita. Oltiin jo lokakuussa ja viimeiset kylpijät olivat
lähteneet tiehensä. Saint-Martinin vanha rakennus oli niin tilava, että
Elisabet saattoi miehelleen varustaa pienen huoneuston ylempään
kerrokseen. Elisabet oli hänet kutsunut, he asuivat saman katon alla,
mutta he eivät voineet rakkaudelleen antautua. Murtumaton voima
pidätti heitä.
— Kuusi, herra Albert. Entä teillä? Eikö muita kuin nuo kaksi?
— Ei.
»Minä pelkään, ajatteli Albert. Hän on niin hauras! Kaksi vuotta jo,
pian kolme, hän on elänyt alituisen levottomuuden vallassa. Kuinka hän
lieneekään uupunut! Hän on rauhan tarpeessa. Olen pystyvä hänelle sitä
antamaan. Nyt, niin, nyt hän on yksin minun kanssani elämässäni, kuten
olemme täällä vain kahden …»
— Ei mikään, ei mikään.
— Kuka?
— Anna de Sézery.
— Ei, ei.
AUENNEET SILMÄT
Aika kului. Kuinka oli hänen otettava Elisabet vastaan? Hän ei voinut
muuta kuin sulkea tämä syliinsä, palauttaa häneen luottamus ja
mielenrauha. Ja hänen oli Elisabetilta salattava oma haavansa. Anna
kaukaisena, kadotettuna, pakonsa ihannoimana jäisi hänen elämäänsä
kuin salaperäiseksi jumaluudeksi, jolle salaa osoitetaan kunnioitusta.
Monet mies-sydämet kätkevät tällaista idealia eikä kukaan sitä aavista,
kun he käyvät jokapäiväiseen työhönsä. Se on itsekunkin salattu
puutarha. Erikseen oli hän hoitava tätä salattua puutarhaansa eikä antava
vaimolleen aihetta pienimpäänkään epäilykseen, pienimpäänkään
kärsimykseen.
Näin pitkälle hän oli päässyt päätöksissään, kun hän näki edessään
Elisabetin. Tämä oli tullut huoneeseen hänen huomaamattaan. Odottaen
sanaa, jonka hän lausuisi, Elisabet jännittyi häntä kohti, ruumis taipuen
levottomuudesta kuin vanamo, jota kukan raskaus painaa. Silloin Albert
otti molemmat kirjeet ja heitti ne tuleen. He näkivät niiden käpristyvän,
muuntuvan ja muuttuvan tuhaksi ja kun kaikki oli lopussa, hän veti
Elisabetin luokseen, koettaen hymyillä, jottei herättäisi hänessä
levottomuutta:
— Katso. Kotiliesi on ne niellyt. Sinua minä rakastan.
— Entä hän?
— Ainoastaan säälitkö?
— Niin.
— Elisabet, älä katso minuun niin. Niin, tuo Annan kirje on koskenut
minuun. Mutta se on mennyttä nyt, vannon sen sinulle. Oli hänen
rakkautensa mikä tahansa, me kuljimme hänen kanssaan kohti kuolemaa.
Sinun kanssasi menemme kohti elämää.
— Oma Albertini!
Hänen vaivansa, hänen raskas vaivansa ei ollut turha ollut. Hän oli
rakentanut eheäksi perheen, joka oli hänen huomaansa jätetty.
Tuskallisesti hän oli oppinut, että me olemme paljon enemmän
vastuunalaisia pikkuseikoista kuin suurista, joissa olosuhteilla on
suurempi osuus, ja että meidän tulee päivästä päivään itse solmia
onnemme hauras ketju. Tulevaisuus oli antava hänelle korvauksen.
Nuoruutensa harhakuvaa hän ei ollut voinut ylläpitää. Mutta hän
ymmärsi paremmin, ja hänen miehensä hänen kanssaan, inhimillisen
hellyyden vastustuskyvyn, kun sitä ylläpitää pyhä lupaus ja lasten
näkyvä side. Tarmolla, jota hän ei itsekään olisi voinut aavistaa, hän oli
tehnyt kaikkein vaikeimman työn, rakentanut uudelleen sen, mikä oli
hävitetty. Ja tämä työ oli muuttanut hänet toiseksi, oli tehnyt hänet
enemmän rakkauden arvoiseksi, kehittänyt kukkaansa hänen sulonsa ja
ymmärryksensä. Tämän kestävän rohkeutensa ynnä nuoruutensa kautta
hän oli voittanut kilpailijansa ja hänen puolisonsa tunsi sen, intohimonsa
kahleiden vihdoin kirvottua.
— Vaimoni.
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