_________________ argues that the exchange of goods between agricultural and industrial countries would result in an increase in the previously relatively low levels of land rents and a drop in the high level of industrial wages in the agricultural country.

Question

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The Heckscher-Ohlin theory states that if two countries specialize in trade based on their factor endowments (such as land and labor), there will be an increase in the previously relatively low levels of land rents and a drop in the high level of industrial wages in the agricultural country. This would be because the country would be exporting goods that require their abundant factor (land in this case) and importing goods that require their scarce factor (labor in this case). The Absolute Advantage theory focuses on a country's ability to produce goods more efficiently than another country, while the Balance of Trade theory focuses on the balance between a country's imports and exports.

_________________ Argues That the Exchange of Goods Between Agricultural and Industrial