7 Written questions
6 Multiple choice questions
- The ratio of a country's exports divided by its GDP.
- 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.
- Dissimilar good with different factor intensities are lumped together in trade statistics.
- The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
- 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.
- 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
Foreign Direct Investment (FDI) → A corporation's purchase of real assets, such as production facilities and equipment, in a foreign country.
Gains from trade → 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.
Adam Smith's Wealth of Nations → Wealth depends on productive capacity
Comparative Advantage → A country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner
Explanations for Intra-industry trade → Occurs when a country imports and exports the same good.
Capital Abundant → the situation where a country has a high capital-to-labor ratio relative to another country.