International Economics
16th Edition
ISBN: 9781305887633
Author: Robert Carbaugh
Publisher: Cengage Learning
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Chapter 2, Problem 10SQ
To determine
The trade triangle.
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Define trade liberalization.
What conclusions does Heckscher-Ohlin trade model bring us in terms of gains from trade?
Define the differences between the classical, country-based trade theories and the modern, firm-based trade theories.
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- If trade increases world GDP by 1 per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lankas GDP.arrow_forwardOccasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.arrow_forwardIf you observed a country with a rapidly growing trade surplus over a period of a year or so, would you be more likely to believe that the countrys economy was in a period of recession or of rapid growth? Explain.arrow_forward
- how does moving towards full employment affect a country’s trade competitiveness?arrow_forwardDefine the term Trade agreement?arrow_forwardIndian exports of computer software have grown rapidly since the early 2000s. In the early 2000s, the cost to employ programmers in India was about half the cost of programmers with comparable skills in the United States. In 2013 the cost in India was about two-thirds the cost in the United States. What trade theory or theories help us to understand the change?arrow_forward
- What is your understanding of trade when referring to the exchange of goods for goods or labor service for money?arrow_forwardWhat factors determine a country’s level of trade? What is the difference between the balance of trade and level of trade?arrow_forwardIf countries engaged in trade enjoy welfare gains, why is there often some opposition to free trade?arrow_forward
- Q95 The division of the gains from trade between two trading countries depends on the... a. Long-run costs. b. Quantity of resources held by each country. c. Level of unemployment in both countries. d. Size of the absolute advantages possessed by each country. e. Difference between the terms of trade and the countries' autarkic relative prices.arrow_forwardUsing the Heckscher-Ohiln trade model, we would expect that in a nation that is labor abundant that exports potatoes, an increase in the quantity of land (the other factor of production) would... A) Worsen the terms of trade for that nation B) Improve the terms of trade for that nation C) Raise wages in that nation D) Both B and Carrow_forwardDefine the differences between the classical, country-based trade theories and the modern, firm-based trade theories. If you were a manager for a large manufacturing company charged with developing your firm’s global strategy, how would you use these theories in your analysis? Which theories seem most appealing to you and which don’t seem to apply?arrow_forward
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