Question

Please answer the questions as soon as possible. Thanks in advance.

Please explain in brief in one to two paragraphs and provide graphs.

1. In two paragraphs, describe the sources of the gains from trade and why countries use import tariffs.

2b In two paragraphs, describe how the COVID-19 pandemic has impacted the global macroeconomy and multiple ways it has impacted a specific agricultural commodity market (e.g. corn, beef, wheat).

Answer 1

Dear Student,

Following are the sources of the gains from trade :

International trade based on differences in comparative advantage increases the efficiency with which world resources are used and thus, increases the world’s real income. But this is not the only gain to be had from international trade. If we allow for market imperfections and for dynamic considerations, trade may yield other gains.

1) Economies of Scale:

This means that, as they produce more output, they can utilise inputs more efficiently and thus, decrease their average costs of production

2) Great Domestic Competition:

Whenever the number of producers in a domestic market is small, then these producers engage in a monopolistic restriction of output. That is, in their quest for maximum profits, they produce too little output for resource allocation to be efficient

3) International trade may increase the efficiency with which domestic resources are allocated by decreasing the prevalence and size of monopo­listic restrictions on output.

4) Greatly international competition.

A fourth source of gain from trade is increased efficiency due to competition from foreign producers.

* why countries use import tariffs

• To protect newly established domestic industries from foreign competition.
• To protect aging and inefficient domestic industries from foreign competition.
• To protect domestic producers from "dumping" by foreign companies or governments. ...
• To raise revenue.

* how the COVID-19 pandemic has impacted the global macroeconomy

1) mobilizing available public resources

These included mobilizing available public resources to augment what private citizens are doing to help the poor and vulnerable; working on some of the national macro-economic levers to sustain businesses; and discussing with international creditors about cancelling – or rescheduling – repayments, of some of their debts

2) Change in Production Pattern

Trade will also be affected by changes in production patterns. Over the last two decades the thrust for improved efficiency and productivity has driven manufacturing, as well as many service industries, towards minimizing costs

3) Increase in Government Debt

budget deficits accumulate into government debt, and current account deficits accumulate into foreign debt. The model imposes an intertemporal budget constraint on all households, firms, governments, and countries. Thus, a long-run stock equilibrium obtains through the adjustment of asset prices, such as the interest rate for government fiscal positions or real exchange rates for the balance of payments

6) High Expenses on Medical Services

The combination of trade and monetary problems emanating from Europe and the USA will put severe strain on Governments in developing countries which are already battling with soaring medical costs, pressing demands to provide emergency assistance to the poorest sections of the population, and assistance to bail out faltering firms.

5) Adverse Effect on Public Health

nominal stickiness caused by wage rigidities, lack of complete foresight in the formation of expectations, cost of adjustment in investment by firms with physical capital being sector-specific in the short run, monetary and fiscal authorities following particular monetary and fiscal rules.

* Agricultural commodity market

1) Reduced demand

Reduced demand for commodities like corn, beef, wheat, timber and vegetable oil can alleviate pressure on forests, and extractive industries are less likely to invest in exploration or new projects during a recession. The precipitous decline in oil prices this year, for example, has already cut exploration budgets in Brazil by 20%.

2) Decrease in price

Food and Agriculture Organization said that food prices have dropped overall, including a 12% decline in the vegetable oil price index.

3) Loss of Export Business

“Eventually, there will be less commodity-led agricultural deforestation and timber-led forest degradation, as aggregate demand in export markets is reduced.Also the export business in vegetable sector also impacted drastically

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