The _____ posits that trade flows between countries will be larger as the economic sizes of the two countries are larger and the geographic distance between the two countries is smaller.

Question

Quizplus · Accepted Answer

The statement describes the gravity model, which posits that trade flows are proportional to the sizes of the economies involved and inversely proportional to the distance between them. The Heckscher-Ohlin model focuses on differences in factor endowments between countries, the theory of absolute advantage focuses on differences in productivity, and the Stolper-Samuelson theorem deals with the effects of trade on the prices of factors of production.

The _____ Posits That Trade Flows Between Countries Will Be