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7 Written questions

6 Multiple choice questions

  1. The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
  2. Financial assets including, stocks, bonds, deposits, and currencies.
  3. 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.
  4. Dissimilar good with different factor intensities are lumped together in trade statistics.
  5. The ratio of a country's exports divided by its GDP.
  6. the smaller of two trading economies receives the greatest gains from trade.
    Trade benefits both trading countries
    Gains due to differences in absolute advantage between countries.

6 True/False questions

  1. 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.

          

  2. Adam Smith's Wealth of NationsThe 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. 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.

          

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

          

  5. Capital AbundantA country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner

          

  6. Intra-industry tradeOccurs when a country imports and exports the same good.

          

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