Internet Application Questions

Go to the following websites:

1. http://www.statcan.ca/english/Pgdb/econ07.htm
2. www.statcan.ca/english/Pgdb/Economy/International/gblec02a.htm
3. www.oecd.org/std/gdp.htm

Explain, according to textbook theory, how the value of the Canadian dollar would be affected by the following:

1. An increase in Canadian imports
2. An increase in Canadian exports
3. A decrease in the GDP of Japan, one of Canada's trading partners.

Using the websites listed above,

1. Observe Canada's GDP, exports, imports, trade balance, and foreign exchange rate for the years 1997 and 1998. During this time, much of Asia was experiencing a deep recession (particularly, Japan and South Korea). Also, compare Canada's foreign exchange rate to GDP values for the U.S., Japan, Germany, and the United Kingdom (UK) during these years.
2. Do you notice a relationship between Canada's foreign exchange rate and GDP values for two of its major trading partners, Japan and South Korea, during the period 1997-1998? What accounts for this relationship?
3. In general, do your conclusions fit with what theory predicts? Do the same conclusions apply to some of Canada's other trading partners, such as Australia and the U.S. during the period 1997-1998? How about during other years?

Go to www.nextcity.com/go/KarenSelick/CL9304.html and read the article available there.

Is Karen Selick arguing for or against the North American Free Trade Agreement (NAFTA)? Explain.

What is protectionism? What is Karen Selick's attitude toward it? Give direct evidence from her paper.

With reference to Karen Selick's lawyer/typist example, suppose that the lawyer has an absolute advantage in both law and typing. In particular, in any given hour of work, the lawyer can read 20 pages of law or type 12 pages of text. The typist, however, can read only 2 pages of law and can type 8 pages of text in the same amount of time. Is it better for the lawyer to do her own legal work and typing, or are gains from trading services possible for both parties? Explain with calculations. How might this example be used to illustrate the advantages of a free trade agreement like NAFTA?