Auditing

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LA TROBE UNIVERSITY
SCHOOL OF ECONOMICS AND FINANCE

SEMESTER ONE 2010 MID-SEMESTER EXAMINATION
ECO2GLO: GLOBALISATION

Solution guide

You must give reasons for your answers; no marks are given if no reasons are given or if the reasons given are incorrect.

1. Are the following statements correct? 1. During the first wave of globalisation, Britain was the only country in Europe that supported free trade. (1 mark) No, many other countries supported free trade until disrupted by the world wars.

2. When restrictions to imports from the New World came down in the first wave of globalisation, grain prices fell in Britain and many parts of Western Europe. This was bad for both landowners and the manufacturing workers in Britain and Europe. (1 mark) NO, bad for landowners but good for manufacturing workers (as consumers)

3. During the First wave of globalisation, unlike at present, international movements of goods and capital increased rapidly but labour did not move internationally on a large scale. (1 mark) The period known as the age of mass migration from Europe to the new world. International capital movements (FDI) was also arising.

4. During the first wave of globalisation, there was not much international integration of commodity markets. (1 mark) The period for great international commodity integration
[total 4 marks for Q1]

2. Consider a ‘small’ country that produces garments and computers. Garments are relatively more labour-intensive, while computers are relatively more capital intensive. The country is relatively labour-abundant. It opens up for international trade. Referring to the relevant model or theorem, briefly explain what would happen to;

1. real wages of garment workers (1 mark) Based on the HO theorem, the labour-abundant country (eg, Australia) will export the labour-intensive goods…...

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