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.
D) Large economies tend to have large incomes and tend to spend more on imports.
E) Large economies tend to avoid trading with small economies.
D
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The consumer maximizes his total utility (measured in money terms) when, at his chosen quantity of every good he buys, marginal utility
A. equals zero. B. divided by price equals zero. C. equals price. D. equals total utility.
Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q2 and marginal costs of MC = 30 + 0.005Q, where Q is the number of cubic yards of concrete it produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demand function is Qd = 20,000 - 400P. What is KGC's average cost function?
A. AC = (50,000/Q) + 50 + 0.005Q B. AC = (20,000/Q) + 30 + 0.005Q C. AC = (50,000/Q) + 30 + 0.0025Q D. AC = 50,000 + 30Q + 0.0025Q2
One advantage of importing is that an importer can diversify its operating risks by developing alternative suppliers.
a. true b. false
The multiplier helps explain
A. why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income. B. why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes. C. why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending. D. why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.