7 Written questions
6 Multiple choice questions
- 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.
- the situation where a country has a high capital-to-labor ratio relative to another country.
- 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.
- 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.
- Occurs when a country imports and exports the same good.
- Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.
6 True/False questions
Portfolio Investment → The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
The Product Life Cycle Theory of Trade → 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.
Foreign Direct Investment (FDI) → The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
The Heckschler-Ohlin Model → A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.
Absolute Advantage → A country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner
Portfolio Capital → The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.