QUESTION Smith, Ricardo, and Heckscher-Ohlin suggested that a country’s economy would gain only if its citizens buy products that are made in that country. Indicate whether the statement is true or false. ANSWER FALSE The theories of Smith, Ricardo, and Heckscher-Ohlin tell us that a country’s economy may gain if its citizens buy certain […]
QUESTION While Vernon’s theory is useful for explaining the pattern of international trade in the modern world, its relevance during the period of American global dominance seemed more limited. Indicate whether the statement is true or false. ANSWER FALSE Vernon’s theory may be useful for explaining the pattern of international trade during the period […]
QUESTION The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce. Indicate whether the statement is true or false. ANSWER TRUE The first theory of international trade, mercantilism, emerged in England in the mid-sixteenth century and asserted that […]
QUESTION New trade theory stresses that in some cases countries specialize in the production of particular products because of underlying differences in factor endowments. Indicate whether the statement is true or false. ANSWER FALSE New trade theory stresses that in some cases countries specialize in the production and export of particular products not because […]
QUESTION The main tenet of mercantilism was that it was in a country’s best interests to maintain a trade surplus. Indicate whether the statement is true or false. ANSWER TRUE The main tenet of mercantilism was that it was in a country’s best interests to maintain a trade surplus (to export more than it […]
QUESTION Limits on imports are often in the interests of domestic consumers, but not domestic producers. Indicate whether the statement is true or false. ANSWER FALSE Limits on imports are often in the interests of domestic producers, but not domestic consumers.
QUESTION A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it. Indicate whether the statement is true or false. ANSWER TRUE A country has an absolute advantage in the production of a product when it is more efficient than any […]
QUESTION The major advantage of mercantilism was that it viewed trade as a zero-sum game. Indicate whether the statement is true or false. ANSWER FALSE The flaw with mercantilism was that it viewed trade as a zero-sum game. (A zero-sum game is one in which a gain by one country results in a loss […]
QUESTION According to the theory of comparative advantage, potential world production is greater with unrestricted free trade than it is with restricted trade. Indicate whether the statement is true or false. ANSWER TRUE The basic message of the theory of comparative advantage is that potential world production is greater with unrestricted free trade than […]
QUESTION In his book The Wealth of Nations, Adam Smith supported the mercantilist assumption that trade is a zero-sum game. Indicate whether the statement is true or false. ANSWER FALSE In his 1776 landmark book The Wealth of Nations, Adam Smith attacked the mercantilist assumption that trade is a zero-sum game, with the argument […]
