When one applies the Heckscher-Ohlin model of trade to the issue of trade-related income redistributions, one must conclude that North South trade, such as U.S.-Mexico trade A) must help low skill workers on both sides of the border. B) is likely to hurt high-skilled workers in the U.S. C) is likely to hurt low-skilled workers […]
Intraindustry trade is characterized by what two features of the industry and market? A) Diseconomies of scale and homogeneous products B) Non-tariff barriers and large-scale foreign investment C) Quota auctions and low effective rates of protection D) Economies of scale and differentiated products E) Government subsidies and industrial policy ANSWER D
Capital inflows that take the form of direct investment may be particularly beneficial if they bring new technologies, new management techniques, and new ideas to the host country. Indicate whether the statement is true or false ANSWER TRUE
Which four nations account for most of the population and economic activity in Latin America? What will be an ideal response? ANSWER Brazil; Mexico; Colombia; Argentina
Explain carefully why the assumption of identical technology worldwide eliminates the classical basis for international trade. What will be an ideal response? ANSWER In the classical model, differences in technology between the two countries lead to differences in autarky prices. If one were to replace that assumption with the HO assumption of identical technologies, […]
An industry is characterized by scale economies and exists in two countries. In order for consumers of its products to enjoy both lower prices and more variety of choice A) the two countries must engage in international trade with each other. B) each country’s marginal cost must equal that of the other country. C) the […]
The high correlation between rapid growth in exports and rapid economic growth observed in several East Asia countries in recent decades A) proves that export promoting trade policy leads to relatively rapid economic growth. B) proves that a free-trade orientation of trade policy results in rapid economic growth. C) proves that exports help growth, whereas […]
External balance refers to A) an economy which is on its LM curve. B) an economy which is on its IS curve. C) an economy which is on its BP curve. D) All of the above. ANSWER C
For the United States, U.S. direct foreign investment abroad is more significant than foreign investment in U.S. securities and currency. Indicate whether the statement is true or false ANSWER FALSE
In a two country and two product Ricardian model, a small country is likely to benefit more than the large country because A) the large country will wield greater political power, and hence will not yield to market signals. B) the small country is less likely to trade at price equal or close to its […]
