7 Written questions
6 Multiple choice questions
- Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.
- The ratio of a country's exports divided by its GDP.
- Financial assets including, stocks, bonds, deposits, and currencies.
- A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.
- the situation where a country has a high capital-to-labor ratio relative to another country.
- Wealth depends on productive capacity
6 True/False questions
Explanations for Intra-industry trade → Occurs when a country imports and exports the same good.
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.
Mercantilism → 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.
Portfolio Investment → The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
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
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.