Global Connections, Risk & Economic Inquiry — Problem set, Grade 12
5 focused units, followed by an evidence workshop, chapter review, and chapter quiz.
Review the key ideas
Trade, Comparative Advantage & Uneven Adjustment
Specialization and exchange depend on terms, feasible production, transport, institutions, and adjustment. Aggregate gains can coexist with losses or difficult transitions for particular workers or places. Consumers, producers, and employees occupy different positions. Compensation or retraining does not occur automatically simply because a model shows total gains.
Exchange Rates, International Payments & Price Effects
Exchange rates affect converted prices while quantities, contracts, and other costs can change too. A price conversion holding a seller’s price constant illustrates a channel, not a guaranteed trade-volume response. Travelers, importers, exporters, borrowers, and investors can have different exposures. A stronger currency is not universally beneficial for every position.
Growth, Development, Resources & Long-Term Choices
Long-term capacity depends on skills, infrastructure, produced capital, knowledge, institutions, and natural conditions. A larger initial investment does not guarantee useful output without maintenance or effective use. Environmental costs and resource depletion can affect future possibilities. Sustainability asks how present activity relates to future conditions under explicit evidence and values.
Financial Instability: Leverage, Risk & Public Responses
The 2007–2009 crisis is a dated historical case involving housing and mortgage markets, financial products, leverage, funding conditions, and institutional failures. Securitization pooled claims and redistributed exposures without eliminating underlying risk. Correlated losses and confidence problems could spread through connected institutions. A single actor, instrument, or party label cannot substitute for a full causal account.
Economics Capstone: A Feasible Plan with Evidence & Risk
Use this invented annual packet: Path A education cost $6,000, grant $3,000, monthly take-home income $800 and recurring spending $650; Path B cost $3,500, grant $1,000, income $1,000 and spending $850. Starting available savings are zero. Assume twelve months of those figures and exclude interest and other costs. The packet does not supply initial payment dates, job certainty, or program outcomes.
Problem 1
Answer and explanation
A has absolute advantage in both goods. Cloth costs A two grain and B three, while grain costs A half a cloth and B one-third. Thus A has comparative advantage in cloth and B in grain. Exchanging one cloth for 2.5 grain can benefit both under the supplied assumptions because the rate lies between two and three. Feasible quantities, distribution, and extra costs remain separate questions.
Compare absolute input requirements.
Calculate opportunity costs.
Compare exchange terms with both costs.
Response criteria
- Explain the relevant institution or economic concept accurately; show correct calculations where needed.
- Connect supplied evidence and stated assumptions to an explained conclusion.
- Compare feasible options and their effects on different people without stereotypes.
- Identify a limitation, tradeoff, uncertainty, or condition that qualifies the conclusion.
Problem 2
Answer and explanation
Absolute advantage compares input requirements directly. Comparative advantage compares opportunity-cost ratios. A’s cloth cost is lower, while B’s grain cost is lower. Relative tradeoffs can differ even when A is faster at every task.
Problem 3
Answer and explanation
The price converts from $100 to $120, a twenty percent increase in dollar cost under the assumptions. The euro appreciates and the dollar depreciates relative to each other. The exercise does not establish actual market rates, purchases, or profit effects. Seller prices, fees, contracts, and demand are held outside this simple conversion.
Multiply €100 by each dollar-per-euro rate.
Compare $100 and $120.
State price-response limits.
Response criteria
- Explain the relevant institution or economic concept accurately; show correct calculations where needed.
- Connect supplied evidence and stated assumptions to an explained conclusion.
- Compare feasible options and their effects on different people without stereotypes.
- Identify a limitation, tradeoff, uncertainty, or condition that qualifies the conclusion.
Problem 4
Answer and explanation
The units determine the conversion direction. Dollars per euro multiplies a euro amount into dollars, while the reciprocal quote works in the other direction. An unlabeled number cannot establish which currency strengthened or what an item costs.
Problem 5
Answer and explanation
Intensity falls from ten to nine energy units per output, a ten percent decline. Total energy use rises eight percent. Thus the quoted claim is false for this packet: efficiency per unit improves while total use increases. The arithmetic does not establish the cause or full environmental effect; resource type, technology, and other evidence would add context.
Divide energy by output.
Calculate changes relative to original measures.
Separate ratios from totals.
Response criteria
- Explain the relevant institution or economic concept accurately; show correct calculations where needed.
- Connect supplied evidence and stated assumptions to an explained conclusion.
- Compare feasible options and their effects on different people without stereotypes.
- Identify a limitation, tradeoff, uncertainty, or condition that qualifies the conclusion.
Problem 6
Answer and explanation
Population can rise proportionately. In the supplied case, 100/50 and 120/60 both equal two. The larger total does not establish higher average output per person or universal improved conditions.
Problem 7
Answer and explanation
Equity falls from $20 to $10. Assets decline ten percent, while equity declines fifty percent. The loss is magnified relative to the smaller residual under fixed-debt assumptions. The packet does not establish cash timing, asset-sale effects, regulatory treatment, or a complete historical cause; those require additional evidence.
Subtract debt from assets.
Compare asset loss with initial assets.
Compare equity loss with initial equity.
Response criteria
- Explain the relevant institution or economic concept accurately; show correct calculations where needed.
- Connect supplied evidence and stated assumptions to an explained conclusion.
- Compare feasible options and their effects on different people without stereotypes.
- Identify a limitation, tradeoff, uncertainty, or condition that qualifies the conclusion.
Problem 8
Answer and explanation
Equity is the smaller residual after debt. The same $10 asset loss removes half the original $20 equity while reducing $100 assets by ten percent. Fixed debt in the example concentrates the change on the residual.
Problem 9
Answer and explanation
Net prices are $3,000 and $2,500; each plan generates $1,800 modeled annual saving; gaps are $1,200 for A and $700 for B. B’s smaller gap is one advantage under the assumptions, not proof of identical outcomes or universal superiority. Tuition dates, income certainty, excluded costs, and financing terms remain essential. Annual saving cannot automatically pay an earlier obligation.
Subtract grants.
Multiply each $150 monthly margin by twelve.
Compare gaps and missing payment dates.
Response criteria
- Explain the relevant institution or economic concept accurately; show correct calculations where needed.
- Connect supplied evidence and stated assumptions to an explained conclusion.
- Compare feasible options and their effects on different people without stereotypes.
- Identify a limitation, tradeoff, uncertainty, or condition that qualifies the conclusion.
Problem 10
Answer and explanation
Payments may be due before savings accumulate, and income or costs may vary. Annual totals identify a resource gap under assumptions, while timing and certainty require additional records. Label missing terms instead of assuming costless bridging funds.