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International Trade and International Finance

Answer two questions (2 questions out of 3; 25 marks each) Whenever possible, and given the nature of each question, you are expected to illustrate your answers with relevant diagrams and equations. You should strictly stick to the word limit as indicated on each question on the exam paper. Please state clearly the word number under each question. Given the nature of the question, you should cite your work (where appropriate) and references should be included at the end of the paper. References, charts equations and tables do not contribute to the word count. (2 questions out of 3) 1. Answer both parts (a) and (b) of this question. a) Evaluate the effects on the economic welfare of the introduction of a tariff by both a small and a large country. Use diagrams and state the assumptions used. [12 marks, max 400 words] b) Critically assess the economic justification for protecting infant industries from international competition. [13 marks, max 400 words] 2. In a second best world, free trade may not always be optimal or possible. Explain why this may be so, and critically evaluate the potential justifications for various trade management measures. [25 marks, max 800 words] 3. Explain the core predictions of Neo-Classical/Heckscher Ohlin trade theory. To what extent is this model useful for explaining global trade patterns? [25 marks, max 800 words]

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