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7 Written questions

6 Multiple choice questions

  1. A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.
  2. Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.
  3. Dissimilar good with different factor intensities are lumped together in trade statistics.
  4. 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.
  5. The ratio of a country's exports divided by its GDP.
  6. 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.

6 True/False questions

  1. Absolute 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.

          

  2. Dynamic Gains from TradeThe 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. Adam Smith's Wealth of NationsWealth depends on productive capacity

          

  4. Foreign Direct Investment (FDI)The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.

          

  5. Portfolio InvestmentThe acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.

          

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