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7 Written questions

6 Multiple choice questions

  1. A corporation's purchase of real assets, such as production facilities and equipment, in a foreign country.
  2. The acquisition of portfolio capital. Usually refers to such transactions across national borders and/or across currencies.
  3. A country has an absolute advantage in a good if it can produce that good by using fewer inputs than its trading partner
  4. 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.
  5. the situation where a country has a high capital-to-labor ratio relative to another country.
  6. Dissimilar good with different factor intensities are lumped together in trade statistics.

6 True/False questions

  1. 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.


  2. The Heckschler-Ohlin ModelA country has a comparative advantage in (and will export) that good which is intensive in the use of that country's abundant resource.


  3. The importance of being unimportantThe ratio of a country's exports divided by its GDP.


  4. Adam Smith's Wealth of NationsThe 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.


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


  6. 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.