LO2-3 | Chapter 2

This theory stated that a country’s wealth was determined by the amount of its gold and silver holdings

• Gold Theory

• Ricardo Theory

• Mercantilism

• Hecksher Theory

What is the core concept of absolute advantage theory proposed by Adam Smith in relation to international trade?

• The balance of trade between countries.

• The specialization of goods to increase efficiency.

• The exchange rate between currencies.

• The regulation of imports and exports.

The theory of comparative advantage is given by

• 1. Adam Smith

• David Ricardo

• Raymond Vernon

• Stefan Linder

Which factor is not affected by the exchange rate?

• Currency Valuation

• Import Costs

• Competitiveness

• None of the above

Apart from interest rates and inflation, the currency exchange rate significantly influences a country's economic well-being.

• True

• False

National competitiveness refers to a nation’s ability to design, produce, distribute, or service products in an international trading context while earning increasing returns on its resources.

• True

• False

Economies of scale and the experience curve can allow a nation’s industries to

• become low-cost producers without needing an abundance of certain production factors.

• design, produce, distribute, or service products in an international trading context.

• 1. export to markets without local production.

• have similar needs and purchasing power for the product.

What is offshoring?

• Subcontracting a part of production to another firm

• Locating activities in another nation

• Exporting

• Importing

Stefan Linder's theory suggests that a nation's per capita income plays a significant role in influencing:

• Resource allocation within the country.

• Government policies regarding trade tariffs.

• The types of products manufactured in the country.

• Foreign investment levels in the country.

The International Product Life Cycle (IPLC) concept suggests that more developed countries (LDCs) with higher labor costs may obtain technology and gain a cost advantage over more developing nations.

• True

• False