1. The gravity model of trade implies that, all other things being equal, trade flows are proportional to the GDP of both countries and inversely proportional to the distance between them. 2. Look at the following table, which gives average product of labour in an imaginary two- good, two-country world: France Germany Cars 20 30 Wheat 50 50 In this scenario, France has comparative advantage in wheat production. 3. According to the Heckscher-Ohlin theorem, the very poorest countries will not be able to export anything, because they are not abundant in any factor.

1. The gravity model of trade implies that, all other things being equal, trade flows are proportional to the GDP of both countries and inversely proportional to the distance between them. 2. Look at the following table, which gives average product of labour in an imaginary two- good, two-country world: France Germany Cars 20 30 Wheat 50 50 In this scenario, France has comparative advantage in wheat production. 3. According to the Heckscher-Ohlin theorem, the very poorest countries will not be able to export anything, because they are not abundant in any factor.

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 1QCMC

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