Hi

I need some information on

(1) Comparative Advantage - Keynesian Economics

(2) Effects and reasons for tariffs

(3) under vs over valuation of currency and its consequences on the domestic economy

(4) Absolute and Relative - Purchasing Power Parity Theories
(b) Keynesian Economics
(i) MPC and MPS
(ii) Multiplier in close economy vs open economy

Thanks

magic

Tariffs are a tax imposed by the government on imported goods. Its makes the cost of imported goods more expensive and therefore discourages it. It is used to protect the local industry form overseas competition.

djocunningham

Comparative Advantage is a fundamental "law" of economics and is not necessarily associated with the macroeconomic theory of Keynesian economics. It is like a simple puzzle to solve, and it really is simple. The puzzle involves solving a mathematical problem of proportions (i.e., ratios). It is always best to illustrate this fundamental law of economics with an example. Let us consider a husband and wife. The wife can make a bed in two minutes, but it takes the husband four minutes to make a bed. The man can wash a car in 30 minutes, while it takes the woman forty minutes. Where is the comparative advantage? Look at the ratios. 2 divided by 4 versus 40 divided by 30. Clearly, both parties benefit by the woman making the bed and the man washing the car. Think about it. A woman can make twice as many beds over a given time period as a man. The man can wash 1.33 cars for every one car washed by a woman. Clear as mud?

Effects and reasons for tariffs. Tarrifs are bad news. Tarrifs are like taxes. This goes back to your first question on comparative advantage. When a tarrif is imposed on one producer and not another, it drives a wedge between the two producers to make it economically advantageous for the producer that does not have the tax.

Under/over valuation of currency and effects on domestic economy. Again, go back to your first question on comparative advantage. An undervalued currency gives firms that produce in an undervalued currency comparative advantage to the firms that produce in an overvalued currency.

Absolute and relative PPP. Absolute PPP involves the comparison of the same good, say apples in Canada and apples in USA. Relative PPP involves comparing price indexes (usually price changes of indices) in Canada versus USA.

Keynesian economics. The study of a closed economy with under employment

MPC and MPS. Marginal means small change as in calculus first derivative. Propensity means ability as in income available for consumption.

Multiplier closed versus open economy. Go back to your first question on comparative advantage. The multiplier effect is greater in an open economy than in a closed economy because of the increase in possible profit.