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7 Written questions

6 Multiple choice questions

  1. The ratio of a country's exports divided by its GDP.
  2. 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.
  3. The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
  4. Production 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.
  5. Occurs when a country imports and exports the same good.
  6. 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

  1. Portfolio CapitalFinancial assets including, stocks, bonds, deposits, and currencies.


  2. Capital Abundantthe situation where a country has a high capital-to-labor ratio relative to another country.


  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. The Stolper-Samuelson TheoryA country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.


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


  6. The Heckschler-Ohlin Modelstates 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.


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