Week 13 — Trade Report: Who Should Make What, and Who Gains? — Traditional alternative (no AI)

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Assignment 12 of the term — work four problems with the course's two-country model and national account, explain what each figure means, and tell a cousin what a trade deficit does and does not mean.

This week you learned why countries trade: absolute advantage counts output, comparative advantage compares opportunity costs, the terms of trade must sit between the two costs, and specializing lets both countries end with more of both goods. In Week 1 you priced choices by their opportunity cost and separated positive from normative statements, and in Week 2 you built GDP with net exports as exports minus imports. In this assignment you work four short problems, interpret each one, and explain to a cousin what a trade deficit does and does not mean. This week's lecture tutorial, quiz, discussion, and Model Workshop practice the same ideas from other angles.

The task

This report uses the week's illustrative numbers, constructed for this course and not real data: per worker-day, Northland makes 4 wheat or 2 cloth and Southland makes 6 wheat or 2 cloth; each country has 12 worker-days; the terms of trade are 2.5 wheat per cloth; and in the course's illustrative national account, exports are 100 and imports are 150, in billions of dollars.

Work these four problems, showing every step on its own line:

1. In the illustrative two-country model, one worker-day in Southland makes 6 wheat or 2 cloth. What is Southland's opportunity cost of one cloth, in wheat?
2. In the same illustrative model, Northland specializes in cloth and trades 14 cloth to Southland at terms of 2.5 wheat per cloth. How many wheat does Northland receive?
3. In the same illustrative model, Southland puts all 12 of its worker-days on wheat at 6 wheat per worker-day and then pays 35 wheat for the cloth it buys. How many wheat does Southland have left after the trade?
4. In the course's illustrative national account, exports are 100 and imports are 150, in billions of dollars. What is the trade balance (net exports), in billions of dollars?

Beside each figure, add one brief interpretation in plain words. For problem 1, say what the cost means, and which country has the comparative advantage in cloth once you compare it with Northland's cost of 2 wheat. For problem 2, say what the wheat Northland receives means for Northland, and why terms of 2.5 wheat per cloth leave both countries better off. For problem 3, say what Southland's remaining wheat means, and whether both countries end with more of both goods than before trade, when Northland had 32 wheat and 8 cloth and Southland had 36 wheat and 12 cloth. For problem 4, describe the trade balance in one neutral sentence, and explain why subtracting imports when adding up GDP does not erase anything made at home.

Explain it to a non-expert

In an illustrative example, your cousin, who works at a furniture warehouse, hears a radio host say the country "lost 50 billion dollars on trade last year" and that a new tariff would win it back. Write a 3–5 sentence message your cousin could follow: what a trade deficit of 50 billion dollars does and does not mean, why two countries can both gain from trading, and one honest limit, such as the adjustment cost that lands on workers in an industry that shrinks, or the higher prices a tariff brings to every household. Explain any technical term in everyday words. More than one good limit can be defended, and you do not have to take a side on the tariff.

For a different, ungraded example, imagine a neighbor who asks why the local bakery buys its flour from a mill instead of grinding its own wheat. Model message: "The bakery could grind its own flour, but every hour spent grinding is an hour not spent baking, which is what it does best. The mill grinds flour all day and gives up much less to do it. So the bakery buys flour and spends its time on bread, and both businesses end up with more than if each did everything itself. The catch is that the bakery now depends on the mill, so if the mill closes or raises its prices, the bakery has to adjust."

Use that pattern for the trade deficit and the gains from trade, with your own explanation.

Here is one honest note about scope: every number in this assignment is illustrative, so do not add a real trade figure or a real tariff rate from the news. The two countries and the national account are built for this course, which is why this report keys only on the model's numbers.

How to work

1. Draft all four figures, the four brief interpretations, and your message for your cousin.
2. Check your draft against the attached scoring criteria, criterion by criterion: is every ratio written with the good given up on top, is the comparative advantage assigned by the lower cost, does the after-trade comparison cover both goods for both countries, and is the trade balance described without calling it a loss?
3. Revise at least one calculation or explanation, and write two or three sentences on what you changed and why.

Deliverables

Submit your trade report with all four figures, their brief interpretations, your message for your cousin, and your two or three sentences on the revision. You may submit it written, recorded as audio or video with a transcript, or as a labelled before-and-after sketch of the two countries' goods with a short note; every form is graded by the same scoring criteria.

Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

The calculations, reasoning, and explanations must be your own work. This version is built to be completed without any AI tool, and no part of it requires one. Use the chapter, your notes, and a calculator or spreadsheet, and show every step so your work can be checked. Do not copy another student's figures or wording.

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