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7 Written questions

6 Multiple choice questions

  1. The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
  2. the situation where a country has a high capital-to-labor ratio relative to another country.
  3. 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.
  4. A country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner
  5. Occurs when a country imports and exports the same good.
  6. A country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.

6 True/False questions

  1. Foreign Direct Investment (FDI)A corporation's purchase of real assets, such as production facilities and equipment, in a foreign country.


  2. 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. Explanations for Intra-industry tradeProduction 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.


  4. Adam Smith's Wealth of NationsWealth depends on productive capacity


  5. 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.


  6. Explanations for Intra-industry tradeDissimilar good with different factor intensities are lumped together in trade statistics.


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