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7 Written questions

6 Multiple choice questions

  1. The ratio of a country's exports divided by its GDP.
  2. A country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner
  3. states that as countries move towards free trade, each country's abundant factor receives a higher rate of payment, and each country's scarce factor is harmed by a lower rate of return.
    o U.S example- Our abundant factor is highly skilled labor, which will benefit from expanded trade with China. Our scarce factor is unskilled labor which is harmed by trade with China.
  4. Financial assets including, stocks, bonds, deposits, and currencies.
  5. are demonstrated by showing that each country moves to a higher CIC. OR, by showing that both countries can have higher levels of consumption of both goods.
  6. A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.

6 True/False questions

  1. Dynamic Gains from TradeThe 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.


  2. Portfolio InvestmentFinancial assets including, stocks, bonds, deposits, and currencies.


  3. Explanations for Intra-industry tradeProduction is spread around the world with various countries producing components that are assembled and sold around the world. Each country specializes in a particular component in order to gain economies of large scale production.


  4. Comparative AdvantageA 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.


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


  6. MercantilismFinancial assets including, stocks, bonds, deposits, and currencies.


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