According to the gravity model a characteristic that

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4. According to the gravity model, a characteristic that tends to affect the probability of trade existing between any two countries is (a) their cultural affinity (b) the average weight/value of their traded goods (c) their colonial—historical ties (d) the distance between them (e) the number of varieties produced on the average by their industries. Answer: D
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12 Krugman/Obstfeld Seventh Edition 5. In general which of the following tend to promote the probability of trade volumes between two countries Discussion 1) The Services sector has been steadily rising in relative importance in GDP of the United States, as well as elsewhere around the world. Since “services” have been identified as “non-tradables” (e.g. it is difficult to export haircuts), it may be argued that this trend will likely slow the rapid growth in international trade. Discuss. Answer: This argument stands on questionable logical foundations. T he past half century has seen a steady growth in the absolute and relative importance of international trade. This trend has been reversed
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