International Trade

What are the underlying assumptions of the Gravity Model of International Trade?

• Trade between two countries is increasing in the product of their GDP

• Trade between two countries is decreasing in the product of their GDP

• Trade between two countries is increasing in their geographic distance

• Trade between two countries is decreasing in their geographic distance

Trade in ... has gone down over the past 15 years

The factors of production are

• Capital

• Intermediary goods

• Labour

• Land

• Services

Which factor of production plays a role in the Comparative Advantage model?

• Capital

• Labour

• Land

• Goods

An industry has a comparative advantage over a foreign industry if there is

• a difference in culture

• a difference in labour productivity

• a difference in wage rates

• a difference in the amount of export-competing companies

A country will become an exporter of a good if

• there are enough producers of that good

• the world market price is above the domestic price

• the government imposes export quotas

• the world market price is below the domestic price

Which model looks at the income distribution between countries that trade?

• Comparative advantage model

• Factors proportion theory

• Specific factors model

• New trade theory

Which are instruments of trade policy?

• Tariffs

• Income taxes

• Government subsidies

• Labour re-training programs

What type of tariff is a 10% tariff on a pair of jeans?

• A specific tariff

• An unspecific tariff

• A harmonised tariff

• An ad valorem tariff

What are effects of a tariff imposed by Home?

• Price for this good rises in Home

• Price for this good rises in Foreign

• Government of Home earns revenue

• Consumers benefit

• Demand in Home decreases