International economics

Paper details:

You are the economic advisor to the president of Pegasusland, who is concerned about several problems confronting his country. Pegasusland’s top exporting sector, manufacturing, is starting to lose international market share (i.e, foreign sales) to other countries that can sell their products a little more cheaply on the international market. Also, his citizens are suffering from inflation, largely driven by rising food prices. Pegasusland is bordered by four other countries: three of those countries are Alafaya, McCulloch, and Colonial. These countries combined account for 60-75% of the foreign trade with each other upon which they all depend. Pegasusland has a large skilled population, but not much in the way of rich mineral resources necessary for manufacturing, which is its top export industry. It also lacks in the way of agricultural products for that matter. Alafaya has rich mineral resources for manufacturing, but very little in regard to an agricultural sector. McCulloch has a climate that allows it to excel at agricultural production of all kinds, but it lacks mineral resources for manufacturing. Colonial lacks much in the way of any of the above resources, except it does have a fishing industry and the nearest major shipping port to the other 100 countries on the planet, which constitutes 79% of that world’s population. Pegausland, Alafaya, McCulloch, and Colonial all impose substantial tariffs to protect their own industries in which they lack inherent or natural assets. Thus, for example, Pegasusland imposes substantial tariffs on imported mineral resources from other countries. Pegasusland is also bordered by Bullanova, a country that is much, much larger than it and the other three aforementioned countries, and Bullanova has various economic assets, which allow it to have a much stronger economy than any of the four previously mentioned countries. While your president gets along well with the queen of Bullanova, your president worries that the queen is getting up in years and may at some point relinquish the thrown to her eldest son, a prince who has aspirations for using Bullanova ’s economic power to gain dominance over Pegasusland and some of the others. Since the people of Pegasusland have a vigorous and independent spirit that your president wants to protect, what kind of economic action would you recommend your president take to improve the economic and international prospects for Pegausland? Based on insights from this class, please provide recommendations for each of the following: 1) an economic policy that Pegasusland could undertake unilaterally to help its manufacturing sector and address the problem of rising food prices, and 2) economic policies that Pegausland could undertake on a bilateral basis with some of its neighbors. Be sure to integrate into your discussion relevant concepts, historical examples, and names of prominent individuals covered in the course, as well as discussion of advantages and disadvantages associataqwed with each of your three proposals.