7 Written Questions
6 Multiple Choice Questions
- Wealth depends on productive capacity
- 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.
- Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.
- Dissimilar good with different factor intensities are lumped together in trade statistics.
- the situation where a country has a high capital-to-labor ratio relative to another country.
- 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.
6 True/False Questions
The Index of Openness → The ratio of a country's exports divided by its GDP.
Comparative Advantage → 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 Product Life Cycle Theory of Trade → 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.
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.
The Stolper-Samuelson Theory → 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.
The importance of being unimportant → The ratio of a country's exports divided by its GDP.