Net Exports and GDP Examination

What is the concept of comparative advantage in factor endowments?

• The concept of producing goods and services without considering resource availability

• Ability of a country to produce goods and services at a lower opportunity cost due to its abundant resources

• The concept of producing goods and services at a higher opportunity cost due to scarce resources

• The concept of producing goods and services at the same opportunity cost regardless of resource abundance

Answer explanation

Comparative advantage in factor endowments refers to the ability of a country to produce goods and services at a lower opportunity cost due to its abundant resources.

What are the determinants of international demand?

• Weather conditions, population size, and technological advancements

• Consumer preferences, income levels, exchange rates, and government policies

• Local supply, advertising strategies, and cultural traditions

• Interest rates, inflation rates, and unemployment rates

Answer explanation

The determinants of international demand include consumer preferences, income levels, exchange rates, and government policies.

Explain the relationship between net exports and GDP.

• Net exports are included in the calculation of GDP to account for the impact of international trade on a country's economy.

• Net exports have no impact on GDP

• Net exports are excluded from the calculation of GDP

• GDP is not affected by international trade

Answer explanation

Net exports are included in GDP calculation to account for the impact of international trade on a country's economy.

What are the factors that determine a country's comparative advantage in factor endowments?

• Access to international markets, trade agreements, and tariffs

• Natural resources, labor force, capital, technology, and infrastructure

• Climate, language, and culture

• Government stability, corruption, and crime rate

Answer explanation

A country's comparative advantage in factor endowments is determined by natural resources, labor force, capital, technology, and infrastructure.

Describe the measures a country can implement to reduce a trade deficit.

Answer explanation

A country can reduce a trade deficit by implementing measures such as promoting exports, reducing imports, implementing trade barriers, and improving competitiveness.

Describe the impact of exchange rates on net exports.

Answer explanation

Exchange rates have a significant impact on net exports. When a country's currency depreciates, its exports become cheaper and more competitive, leading to an increase in net exports. Conversely, when a country's currency appreciates, its exports become more expensive, resulting in a decrease in net exports.