China in the Global Economy (Fall 2024)

Problem Set 3

(100 points total)

Due November 18th, 2024 before 11 pm on Moodle

Please submit your own copy of the homework on Moodle. Feel free to work with your classmates. However, answers that are identical to your classmates may be considered as plagiarism, which is subject to the penalty discussed in the syllabus.

Please use the following convention in naming your file: ps3_name.docx

A. International Trade

•    (15 points) Please explain intuitively what is comparative advantage. Feel free to use a simple life example that you are familiar with. (max. 100 words)

•    (20  points) The Trump administration  in the  United States argued that tariffs against imports will bring jobs back to the US, as domestic companies will be able to enjoy higher profits  and  more  sale.   Please  discuss  whether  or   not  you  think  the  current  tariffs arrangement can help to raise US companies’ profits. (max. 100 words)

B. International Finance

Answer the following questions based on our discussions in Lecture 5.

•    (15  points) It  is  commonly  argued  by  many  policy  makers  that  Chinese currency, the renminbi (RMB), is undervalued according to its economic development. Please discuss two potential benefits if RMB is undervalued. (max. 100 words)

•    (20  points)  Since  2022,  in  order  to  deal  with  the  inflation  issue,  the  United  States implemented a series of monetary policy and the interest rate hikes. Following these changes, please list and explain how the rising interest rate in the United States affect Chinese economy through financial and trade channel. Please pick three effects that you think are the most significant to China. (max. 200 words)

C. China’s Growth Miracle

Answer the following questions based on our discussion in Lecture 6.

•    (20  points)  Following  our  discussion  about  China’s  model  in  developing  its  economy, please list two aspects that can represent the China Model and explain why (max. 150 words)

•    (10 points) China’s significant growth highly relies on the investment during the past three decades. Please list two potential drawbacks or problems that high investment may bring to China. (max. 100 words)