What is the Heckscher-Ohlin theorem? Using the case studies in the chapter on U.S. trade with China describe the theory and the resulting trade patterns that would support it.
What will be an ideal response?
Question 2 - One drawback to a single currency is that
A) the exchange rate is more volatile.
B) bond markets are larger and therefore harder to control.
C) exporters and importers have fewer choices about how they will receive and make payments.
D) individual nations cannot use monetary policy to stabilize the economy.
Question 3 - The WTO encourages nations to take unilateral action on trade issues, including issues involving environmental protection.
Indicate whether the statement is true or false
Question 4 - All of the following are possible explanations for why it took so long for trade balances to respond to the depreciation of the dollar EXCEPT
A) the prior increase in the value of the dollar had padded the profit margins of foreign producers.
B) foreign trade barriers made it impossible for the United States to substantially expand exports it bought.
C) there were still impacts from earlier appreciations working through the system.
D) exports began to increase from a much lower base than imports.
Question 5 - The graph above shows the PPC for a country that can produce oil or televisions. The straight line is the trade line and CPC if production is at Point A. Is this country producing the optimal mix of oil and televisions to maximize its income? Carefully explain how you know.
What will be an ideal response?
Question 6 - The single currency project in the EU will be most successful if European labor is relatively
A) immobile.
B) immobile and business cycles are not synchronized.
C) mobile and business cycles are synchronized.
D) mobile and business cycles are not synchronized.
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