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7 Written questions

6 Multiple choice questions

  1. Different countries produce different varieties of the same product to sell to consumers in various countries with differences in preferences.
  2. The ratio of a country's exports divided by its GDP.
  3. Financial assets including, stocks, bonds, deposits, and currencies.
  4. A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.
  5. the situation where a country has a high capital-to-labor ratio relative to another country.
  6. Wealth depends on productive capacity

6 True/False questions

  1. Explanations for Intra-industry tradeOccurs when a country imports and exports the same good.


  2. The Stolper-Samuelson Theorystates 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.


  3. MercantilismThe 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.


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


  5. Comparative 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 Product Life Cycle Theory of TradeAs 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.


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