Why do you suppose that South-South trade does not conform in volume, but does conform in pattern with expectations generated by the Heckscher-Ohlin model?
What will be an ideal response?
The pattern of trade is generally observed to conform to the Heckscher-Ohlin models expectations. That is, the developing countries tend to export labor-intensive goods, such as textiles, and import capital-intensive goods such as machinery. The volume however is quite lower than what would be expected from the Neoclassical model. There are many possible reasons, such as financial crises necessitating premia in the financing of this trade.
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Inferior goods have an income elasticity of demand that is
a. positive b. negative c. 0 d. greater than 1 in absolute value e. equal to 1 in absolute value
By a leading economic indicator, economists mean:
a. an indicator of future economic activity b. an indicator that reflects economic fluctuations as they occur. c. a highly accurate indicator that is easily measured. d. an indicator that predicts the level of inflation in an economy. e. any variable that follows changes in economic activity.
According to the graph shown, the amount bought by domestic consumers when there is open trade for this good is:
This graph demonstrates the domestic demand and supply for a good, as well as a quota and the world price for that good.
A. 1500.
B. 1150
C. 500.
D. 250.
Contractionary fiscal policy would be most effective in decreasing inflation when
a. the marginal propensity to consume low. b. investment spending is insensitive to interest rates. c. the economy has a high marginal tax rate. d. investment spending is sensitive to interest rates.