The United States is known to be more capital abundant than labor abundant. According to ____________ theory,the U.S.should export capital intensive goods in exchange for labor intensive goods.

Question

Quizplus · Accepted Answer

The theory that suggests that a country will export goods that use relatively abundant factors of production and import goods that use relatively scarce factors of production is called factor proportions theory. Since the U.S. is more capital abundant, according to this theory, it should export capital-intensive goods (which require more capital than labor) in exchange for labor-intensive goods (which require more labor than capital). Therefore, option E is the correct answer.

The United States Is Known to Be More Capital Abundant