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7 Written questions

6 Multiple choice questions

  1. The ratio of a country's exports divided by its GDP.
  2. 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.
  3. Dissimilar good with different factor intensities are lumped together in trade statistics.
  4. The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
  5. As 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.
  6. 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.

6 True/False questions

  1. Foreign Direct Investment (FDI)A corporation's purchase of real assets, such as production facilities and equipment, in a foreign country.


  2. Gains from tradeare 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.


  3. Adam Smith's Wealth of NationsWealth depends on productive capacity


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


  5. Explanations for Intra-industry tradeOccurs when a country imports and exports the same good.


  6. Capital Abundantthe situation where a country has a high capital-to-labor ratio relative to another country.


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