S-6 Chapter 5 Final post wQuiz

S-6 Chapter 5 Final post wQuiz - Chapter 5 Who Gains and...

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W. J. Streeter MEC 292 – FALL 2008 Who Gains and Who Loses from Trade? Chapter 5
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W. J. Streeter mec 292 – Fall 2008 Exports are credits (+) A resident of the exporting country is selling and getting paid in: gold (mercantilist era thinking) other goods (barter) some nations currency Imports are debits (-) A resident of the importing country must pay for the imported goods.
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W. J. Streeter mec 292 – Fall 2008 Current Account, Financial Account Net Foreign Investment ( I f ). When U.S. imports exceed exports there will be a Current Account deficit Since each import entry is a debit, there will be an equal credit entry in the Financial Account to record the increase in US dollar holdings by foreigners. But that increase in US dollar holdings by foreigners (credits in the Financial Account) also represents an increase in US government liabilities (debt) to foreigners, so net foreign investment (I f ) is negative. A country with a Current Account deficit has negative net foreign investment and is said to have net foreign borrowings.
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W. J. Streeter mec 292 – Fall 2008 Trade's victims In the shadow of prosperity
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W. J. Streeter mec 292 – Fall 2008 Permanently Jobless: Long-term Effects of Socialism in Mixed Economies Long-term unemployed (12 months or more) as a percentage of the total unemployed in 2002. U.S. 8.5% Britain 23.1 Japan 30.8 France 33.8 Germany 47.9 Italy 59.2 Source: OECD
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W. J. Streeter mec 292 – Fall 2008 The Tax Burden of Social Benefits
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W. J. Streeter mec 292 – Fall 2008 Quiz: 1) The opening of trade between a land abundant country and a labor abundant country should lead to: A. Higher rents and wages in both countries. B. Lower rents and wages in both countries. C. Higher rents in the labor abundant country and higher wages in the land abundant country A. Lower rents in the labor abundant country and lower wages in the land abundant country.
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W. J. Streeter mec 292 – Fall 2008 2) Given the assumptions of the Heckscher- Ohlin model, the opening of trade in a land-abundant country will cause the domestic price of wheat to: A. Fall A. Rise A. Be unaffected B. At first rise but then fall back
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W. J. Streeter mec 292 – Fall 2008 3) The factor-price-equalization theorem tells us that
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S-6 Chapter 5 Final post wQuiz - Chapter 5 Who Gains and...

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