Deck 12: International Factor Movements

Question 1

The recent immigration of labor into the United States from Mexico has led to increased calls for new restrictions on this movement of labor (including greater enforcement of existing restrictions). What would be the costs and benefits to the United States of such restrictions?

Answer 1

not answered

Question 2

Foreign investment such as the purchase of foreign bonds or the deposit of funds in a bank account in another country is called __________ investment; this type of Investment involves __________ control over production in the host country than does The other type of investment.

A) direct rather than portfolio; more
B) direct rather than portfolio; less
C) portfolio rather than direct; more
D) portfolio rather than direct; less

Answer 2

portfolio rather than direct; less

Question 3

In the graph below, without capital movements between countries I and II, the capital Stock in country I is 0K₁ and the capital stock in country II is K₁0'. The return to capital In country I is thus __________ and the return to capital in country II is __________.

A) 0r₁; 0'r'₁
B) 0r₃; 0'r'₁
C) 0r₁; 0'r'₃
D) 0r₂; 0'r'₃

Answer 3

0r₁; 0'r'₃

Question 4

According to the Department of Commerce information given in the textbook, the industry in which the largest amount of foreign direct investment (FDI) in the United States has been made is __________.

A) finance (except depository institutions) and insurance
B) information
C) manufacturing
D) wholesale trade

Question 5

In the diagram in Question #9 above, if restrictions on capital flows were removed and capital was allowed to flow from the low-return country to the high-return country, then total output in country I __________.

A) would increase by the amount of area K₂EAK₁
B) would decrease by the amount of area K₂EFK₁
C) would decrease by the amount of area K₂EGK₁
D) would decrease by the amount of area EFG.

Question 6

According to the Department of Commerce information given in the textbook, the country which is the recipient of the largest amount of U.S. foreign direct investment (FDI) is __________.

A) Canada
B) the Netherlands
C) Saudi Arabia
D) the United Kingdom

Question 7

Direct investment inflows by foreigners into the United States have been sizable in recent years. How might this net inward movement of capital affect the level and pattern of U.S. trade according to the Heckscher-Ohlin model? The level of world output?

Question 8

Many industrialized countries such as the United States attempt to seriously restrict immigration of production workers, but are more open to immigrants who are highly-skilled. Why might this be the case? Why is this a problem for developing countries and how might they deal with the problem?

Question 9

Economists frequently point out that factor movements between two countries can be a substitute for goods movements between the countries in terms of the impact on relative factor prices in the countries. Explain why the two types of movements can be substitutes.

Question 10

In the diagram in Question #9 above, if restrictions on capital flows were removed, Capital would move from__________, and this movement would reduce the return to Capital in __________.

A) country I to country II; country I
B) country I to country II; country II
C) country II to country I; country I
D) country II to country I; country II

Question 11

In the diagram in Question #9 above, if restrictions on capital flows were removed and Capital was allowed to flow from the low-return country to the high-return country, then Total output in country II would rise by area __________.

A) 0'r'₃AK₁
B) K₁AEK₂
C) K₁FEK₂
D) K₁GEK₂

Question 12

The impact of labor migration on patterns of international trade depends on the characteristics of the labor migrants. In which cases might migration expand trade? World income? In which cases might it reduce trade and world income?

Question 13

According to the Department of Commerce information given in the textbook, the industry in which the United States has made the largest amount of foreign direct investment (FDI) abroad is __________.

A) finance (except depository institutions) and insurance
B) information
C) manufacturing
D) mining

Question 14

If labor moves from a labor-abundant country to a capital-abundant country, other things Equal, consideration of the Rybczynski theorem suggests that the labor movement will Cause __________ production effect in the labor-abundant country.

A) an ultra-antitrade
B) an antitrade
C) neutral
D) an ultra-protrade

Question 15

In the diagram in Question #9 above, if restrictions on capital flows were removed and Capital was allowed to flow from the low-return country to the high-return country, then National income (i.e., GNP) in country I would __________ by the amount of area__________.

A) decrease; K₂EFK₁
B) decrease; K₂EGK₁
C) increase; AEF
D) increase; EFG

Question 16

In the diagram in Question #9 above, if restrictions on capital flows were removed and capital was allowed to flow freely from the low-return country to the high-return country, then world output would rise by the amount of area __________.

A) EAF
B) EFG
C) EAG
D) K₂EAK₁

Question 17

Because real investment by foreigners expands a country's capital stock and hence presumably its output and income, why should any country consider restricting foreign investment?

Question 18

In the diagram in Question #9 above, if restrictions on capital flows were removed and Capital was allowed to flow freely from the low-return country to the high-return country, Then national income (i.e., GNP) in country II would rise by the amount of area__________.

A) EAF
B) EFG
C) EAG
D) K₂EAK₁

Question 19

According to the Department of Commerce information given in the textbook, the country which has made the largest amount of foreign direct investment (FDI) in the United States is __________.

A) Canada
B) Japan
C) the Netherlands
D) the United Kingdom

Question 20

Explain the underlying basis for foreign direct investment, and discuss several factors that may contribute to it. What factors have likely contributed to the current U.S. net direct investment position?

Question 21

Consider the labor situation in countries I and II in a two-country world with the marginal Physical product schedules MPPL_I (= demand for labor schedule D_I) for country I and Marginal physical product schedule MPPL_II (= demand for labor schedule D_II) for country II shown in the graph below (where the vertical axes also represent real wages):

Without any migration of labor between the two countries, the labor force is 0L₁ in country I and (in the leftward direction) 0'L₁ in country II. If labor is now allowed to flow freely between the two countries, labor would migrate __________. As a result of the migration, world output would increase by the amount of triangle __________.

A) from country I to country II; CBA
B) from country I to country II; FBA
C) from country II to country I; CFA
D) from country II to country I; CBA

Question 22

In the graph in Question #23 above, the migration of labor would result in an increase in country I's Gross National Product of the amount of area __________.

A) L₁CBAL₂
B) L₁CAL₂
C) CFA
D) FBA

Question 23

In the graph in Question #23 above, the migration of labor would result in __________ in country I's Gross Domestic Product of the amount of area __________

A) an increase; L₁CBAL₂
B) an increase; L₁CFAL₂
C) a decrease; L₁CAL₂
D) a decrease; L₁CFAL₂

Question 24

If there is diminishing marginal productivity of labor in production (with other inputs held constant), an outmigration of labor from low-wage country A to higher-wage country B will lead, other things equal, to a __________ in per capita income in country B and __________ in per capita income in country A.

A) rise; also to a rise
B) rise; to a fall
C) fall; also to a fall
D) fall; to a rise

Question 25

Labor immigration

A) always produces a net social cost to society.
B) clearly appears to result in a net cost to government in the United States.
C) in the United States appears to be of relatively less-skilled workers on average than in The past.
D) almost always has a positive effect on the country of origin since it is usually the Less-skilled worker who migrates.

Question 26

Suppose that, other things equal, labor moves from country A to country B. In a two-Factor world (capital and labor), this labor movement will lead to

A) an increase in the total return to owners of capital in country A.
B) a decrease in the total return to owners of capital in country A.
C) a decrease in the wage rate in country B.
D) a decrease in total wages paid in country B.

Question 27

In the graph in Question #23 above, the migration of labor would result in __________ in country II'sGross Domestic Product and __________ in country II's Gross National Product.

A) an increase; would also result in an increase
B) an increase; would result in a decrease
C) a decrease; would result in an increase
D) a decrease; would also result in a decrease

Question 28

Consider a situation where a foreign investor firm in country A wishes to move recorded profits out of country A to another plant location in country B. If the firm wants to utilize transfer pricing, it would want to record the prices of its exported goods from country A to country B at a __________ value than would be the case in an ordinary market transaction, and the firm would, when recording the prices of goods that it imports into country A from country B, __________ value than would be the case in an ordinary market transaction.

A) higher; want to record the prices at a lower
B) higher; also want to record the prices at a higher
C) lower; also want to record the prices at a lower
D, lower; want to record the prices at a higher

Question 29

In a perfectly-competitive world, restrictions placed by developing countries to halt a "brain drain" would lead to __________ in efficiency and world output in a static sense;Over time, these restrictions might, other things equal, __________ in the per capita income differences between developing countries and developed countries if skilled labor has important production externalities.

A) a decrease; lead to an increase
B) a decrease; also lead to a decrease
C) an increase; lead to a decrease
D) an increase; also lead to an increase

Question 30

If there is diminishing marginal productivity of labor in production (with other inputs held constant), an outmigration of labor from low-wage country A to higher-wage country B will lead, other things equal and if trade is taking place in accordance with the Heckscher-Ohlin analysis, to __________ production effect in the capital-abundant country.

A) an ultra-antitrade
B) an antitrade
C) a neutral
D) an ultra-protrade