Exam 2: Foundations of Modern Trade Theory: Comparative Advantage

Assume that the United States and Canada engage in trade.If the international terms of trade coincides with the U.S.cost ratio,the United States realizes all of the gains from trade with Canada.

Ricardo's theory of comparative advantage does not take into account demand conditions when determining relative commodity prices.

If a country's terms of trade worsen,it must exchange fewer exports for a given amount of imports.

If a production possibilities curve is bowed out (i.e.,concave)in appearance,production occurs under conditions of:

A nation realizes maximum gains from trade at the point where the international terms-of-trade line is tangent to its community indifference curve.

-Referring to Table 2.3,which country's terms of trade did not change between 1990 and 2004?

The terms of trade is given by:

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.

Adam Smith contended that gold,silver,and other precious metals constituted the wealth of a nation.

Introducing indifference curves into our trade model permits us to determine:

Which of the following terms-of-trade concepts is calculated by dividing the change in a country's export price index by the change in its import price index between two points in time,multiplied by 100 to express the terms of trade in percentages?

In the absence of trade,a nation is in equilibrium where a community indifference curve:

When a nation is in autarky and maximizes its living standard,its consumption and production points are:

The expression "importance of being unimportant" suggests that if one nation is much larger than the other,the larger nation realizes most of the gains from trade while the smaller nation realizes fewer gains from trade.

The price-specie-flow mechanism illustrated why one nation's gains from trade were accompanied by another country's losses.

A term-of-trade index that equals 90 indicates that compared to the base year:

Trade between two nations would not be possible if they have:

If the international terms of trade lies beneath (inside)the Mexican cost ratio,Mexico is worse off with trade than without trade.

"The equilibrium relative commodity price at which trade takes place is determined by the conditions of demand and supply for each commodity in both nations.Other things being equal,the nation with the more intense demand for the other nation's exported good will gain less from trade than the nation with the less intense demand." This statement was first proposed by:

According to the price-specie-flow-doctrine,a trade-surplus nation would experience gold outflows,a decrease in its money supply,and a fall in its price level.