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International Economics Study Set 1
Quiz 2: Foundations of Modern Trade Theory: Comparative Advantage
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Question 141
True/False
According to J.S.Mill,if we know the domestic demand expressed by both trading partners for both products,the equilibrium terms of trade can be defined.
Question 142
True/False
If a country's terms of trade improve,it must exchange more exports for a given amount of imports.
Question 143
True/False
An improvement in a nation's terms of trade occurs if the prices of its exports rise relative to the prices of its imports over a given time period.
Question 144
True/False
The theory of reciprocal demand best applies when two countries are of equal economic size,so that the demand conditions of each nation have a noticeable impact on market prices.
Question 145
True/False
If two nations of approximately the same size and with similar taste patterns participate in international trade,the gains from trade tend to be shared about equally between them.
Question 146
True/False
Assume 1990 to be the base year.If by the end of 2004 a country's export price index rose from 100 to 130 while its import price index rose from 100 to 115,its terms of trade would equal 113.
Question 147
True/False
Although J.S.Mill recognized that the region of mutually beneficial trade is bounded by the cost ratios of two countries,it was not until David Ricardo developed the theory of reciprocal demand that the equilibrium terms of trade could be determined.
Question 148
True/False
If the international terms of trade lies beneath (inside) the Mexican cost ratio,Mexico is worse off with trade than without trade.
Question 149
True/False
The terms of trade represents the rate of exchange between a country's exports and imports.
Question 150
True/False
Assume that Canada has a comparative advantage in wheat and a comparative disadvantage in autos.As the Canadian demand for wheat increases,Canada's equilibrium terms of trade improves.
Question 151
True/False
The domestic cost ratios of nations set the outer limits to the equilibrium terms of trade.
Question 152
True/False
The theory of reciprocal demand asserts that as the U.S.demand for Canadian wheat rises,the equilibrium terms of trade improve for the United States.
Question 153
True/False
Assume 1990 to be the base year.If by the end of 2004 a country's export price index rose from 100 to 140 while its import price index rose from 100 to 160,its terms of trade would equal 120.
Question 154
True/False
Because the Ricardian theory of comparative advantage was based only on a nation's supply conditions,it could only determine the outer limits within which the equilibrium terms of trade would lie.