SDSU Econ 475 Test 1

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Canada and Australia are​ (mainly) English-speaking countries with populations that are not too different in size​ (Canada's is 60 percent​ larger). But Canadian trade is twice as​ large, relative to​ GDP, as​ Australia's. Why should this be the​ case?

1. Canada is close to a major economy 2. Transportation costs for imports and exports are higher in Australia because the distance goods must travel.

International capital markets

1. have grown significantly since the 1960's 2. link the capital markets of individual countries

In​ 2013, what percent of all world consumption​ (private and​ public, including real​ investment) was​ imported?

30%

The fundamental reason why trade potentially benefits a country is that it

Expands the economy's choices

Using the gravity​ model, explain why East Asian countries do an increasing share of their trade with each other.

Since the GDP of East Asian countries has​ grown, the product of any two East Asian​ countries' GDP is now larger. And as the gravity model​ predicts, the trade volume between them has grown.

What is does the slope of a PPF convey

The opportunity cost

Since the end of WWII, have there been concerns among developed countries regarding the amount of trade?

Yes, by a largely political movement of protectionists and new ideologists.

In the specific factors​ model, a​ country's production possibility frontier is​ ________ because of​ ________.

a curved line; decreasing marginal returns

Trade gives the possibility of

a mutually beneficial rearrangement of world production

The relative demand for labor function is shaped as

a step function

In the specific factors​ model, what will increase the quantity of labor used in cloth​ production?

an increase in the price of cloth relative to food

The GATT was

an international treaty governing trade

The Ricardian model of international trade makes predictions about actual international trade flows that

are supported with qualification by the empirical evidence.

Like the simple Ricardian​ model, the specific factors model

assumes that a country that produces two goods and can allocate its labor supply between two sectors

A century ago each​ country's exports were shaped largely by

climate and natural resources.

The sources of modern trade are largely rooted in

country differences in human and​ human-created resources.

For trade to take​ place, a country must face a world relative price that is

different from the relative price that would prevail in the absence of trade.

The potential for gains from the rearrangement of production among countries is due to

differing opportunity costs

When opening up to​ trade, an economy

exports the good with the higher relative price and imports the good with the lower relative price

Immigration into the U.S. over the past century has caused the percentage of immigrants in the U.S. population to

fall steadily until the 1970's and increase thereafter

Cost-benefit analysis of international trade

focuses attention on conflicts of interest within countries

The coordination of international macroeconomic policies among sovereign nations

has only recently been advocated by economists.

What trends promote trade?

historical ties, linguistic/cultural affinity, sizes of economies, mutual membership in trade agreements

Since World War II​ (the early​ 1950s), the proportion of most​ countries' production being used in some other country

increased

Movement of labor from a Foreign country to the domestic​ (Home) economy

increases the marginal product of labor at foreign

Transactions that involve the physical movement of goods or a tangible commitment of resources are the domain of

international trade analysis

International economics can be divided into two broad​ subfields:

international trade and international money

The degree of specialization predicted by the basic Ricardian model

is more extreme than in the real world

In the current​ Post-Industrial economy, international trade in services

is relatively small

The current process of increasing economic integration among national​ economies, better known as​ globalization,

is the​ world's second wave of such integration.

According to international trade theory, when countries engage in trade it

is usually beneficial to both countries

A country has a comparative advantage in producing a good if

its opportunity cost of producing that good is lower than elsewhere.

In the specific factors​ model, which of the following is treated as a specific​ factor?

land

In the​ present, most of the exports from China are in

manufactured goods.

In the specific factors​ model, labor is defined as​ a(an)

mobile factor

Trade has ambiguous effects on

mobile factors

In the real​ world, the dividing line between trade and monetary issues is

neither simple nor clear

The overall welfare effects of trade are​ ________ if​ ________.

positive; those who gain can compensate those who lose and still be better off

In the​ pre-World War I​ period, the United Kingdom imported primarily

primary products including agricultural.

In the​ pre-World War I​ period, the United Kingdom imported primarily

primary products including agriculture

In the​ multi-good, single-factor Ricardian model the equilibrium relative wage of​ Home's workers is determined by the

relative demand and relative supply of labor.

Over the past forty years the composition of​ developing-country exports has

shifted from primary products to manufacturers

Within each country that opens itself to international​ trade,

some factor owners gain, while other factor owners lose

According to the gravity​ model, a characteristic that tends to affect the probability of trade existing between any two countries is

the distance between them

In the​ multi-good, single-factor Ricardian​ model, the decisive factor in determining which country will produce a particular good is

the identification of the lowest cost producer

As more labor is​ used, holding capital​ constant,

the marginal product of labor decreases

Under perfect​ competition, the equilibrium price of labor used to produce cloth will be equal to

the marginal product of labor in the production of cloth times the price of cloth.

In each sector of a specific factors​ economy, profit-maximizing employers will demand labor up to the point where

the marginal product of labor times the price of the product equals the wage rate

The gravity model claim "size matters" asserts that there is a strong empirical relationship between the size of a country's economy and

the volume of its imports and exports

Countries will tend to export those goods in which

their relative productivity is high

Over the past forty years the composition of​ developing-country exports has

undergone a dramatic shift from primary products to manufactures.

When a​ country's labor market is in equilibrium in the specific factors​ model, the wage rate

will be the same in both sectors


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