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7 Written questions

6 Multiple choice questions

  1. 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.
  2. The 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. 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.
  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. 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. Occurs when a country imports and exports the same good.

6 True/False questions

  1. Gains from tradeare 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.

          

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

          

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

          

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

          

  5. MercantilismFinancial assets including, stocks, bonds, deposits, and currencies.

          

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