International trade assig 3

1.Mongolia and Malaysia have very different trading patterns. Mongolia trades mainly with China, while Malaysia trades about equally with China and with other Asian countries. Malaysia does more trade relative to its GDP. Explain these differences using the gravity model. 200 words

2.Which of the following are foreign direct investments (FDI), and which are not? Explain your answer to each. response all together 200 words.

A German businessman buys $10 million of Toshiba stock on the Tokyo Stock Exchange.
A French businessman buys an apartment building in Rome, Italy.
A German company merges with a British company; stockholders in the British company exchange their stock for shares in the German firm.
A Korean firm builds a plant in Brazil and manages the plant as a contractor to the Brazilian government. 3. What are the two sources of economies of scale? How do these economies of scale lead to intraindustry trade? 200 words 4. Perfect labor mobility would tend to equalize real wage rates in participating countries. In reality, complete wage equalization does not occur. Why? In addition, if stringent restrictions are imposed on migration, what will happen to capital in high wage countries? 200 words

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International Trade Assignment

Question 1

The differences can be explained through the gravity model through assessing the trading system of each country. According to the model, countries with higher GDPs (Gross Domestic Product) have more trade between them due to the similarities that exist between the industries in each nation. The model is in line with the law of gravity which suggests that bigger objects are more likely to attract each other than smaller objects. Counties with larger GDPs are thereby more likely to trade with each other compared to others that have smaller GDPs. As a result, despite the fact that Mongolia trades with China, the amount of trade or transactions that they undertake cannot exceed the value of the transactions that take place between China and Malaysia.

(879 words)