1 Econ 4550/6550 International Trade Assignment 1 Due on Friday, September 4 Answer ALL questions. Answers to questions 5 and 6 in section II should be typed. Section I. Multiple Choice [4x2=8] 1. The gravity model offers a logical explanation for the fact that A) trade between Asia and the U.S. has grown faster than NAFTA trade. B) trade in services has grown faster than trade in goods. C) trade in manufactures has grown faster than in agricultural products. D) Intra-European Union trade exceeds International Trade of the European Union. E) None of the above. 2. Why does the gravity model work? A) Large economies became large because they were engaged in international trade. B) Large economies have relatively large incomes, and hence spend more on government promotion of trade and investment. C) Large economies have relatively larger areas which raises the probability that a productive activity will take place within the borders of that country.
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