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7 Written questions

6 Multiple choice questions

  1. A country has a comparative advantage in the production of a good if the relative cost (opportunity cost) of producing that good is lower than that of its trading partner.
  2. the situation where a country has a high capital-to-labor ratio relative to another country.
  3. The gains from trade that occur over time because trade causes an increase in a country's economic growth or induces greater efficiency in the use of existing resources.
  4. The economic doctrine that contends a country's wealth is determined by its holdings of precious metals and espouses trade policies that promote the accumulation of gold and silver.
    *The school of thought that advocated policies designed to generate trade surpluses, so as to increase a country's holdings of gold.
  5. Occurs when a country imports and exports the same good.
  6. Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.

6 True/False questions

  1. Portfolio InvestmentThe acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.

          

  2. The Product Life Cycle Theory of TradeAs new products mature, comparative advantage shifts from one country to another. New products are intensive in highly skilled workers (inventors, engineers), giving highly educated countries a comparative advantage. As a product matures large scale production takes over, favoring capital abundant countries. Finally, production becomes routine, and labor abundant countries have the comparative advantage.

          

  3. Foreign Direct Investment (FDI)The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.

          

  4. The Heckschler-Ohlin ModelA country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.

          

  5. Absolute AdvantageA country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner

          

  6. Portfolio CapitalThe acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.

          

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