L4-5: HO Trade Insights

Froggy Jumps

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Test your understanding of the Heckscher–Ohlin model.

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Emma

Sweden

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L4-5: HO Trade Insights


Froggy Jumps L4-5: HO Trade InsightsOnline version Test your understanding of the Heckscher–Ohlin model. by Emma 1 In HO, which factor endowment leads Home to export X, the labor-intensive good? a identical endowments in both countries b Capital-abundant endowment in Home c Labor-abundant endowment in Home 2 Which country exports the capital-intensive good Y under HO? a Home (labor-abundant) b Foreign (capital-abundant) c Both countries equally 3 Which theorem predicts price convergence under HO trade? a Divergence of factor prices b Convergence of relative prices c No price change with trade 4 Under HO, why do countries trade? a No differences in resources b Differences in relative endowments c Same technology 5 What does RS represent in HO diagrams? a Relative demand of X to Y b Relative supply of X to Y c Global price level 6 What determines the HO trade pattern? a Consumer preferences alone b Endowment differences and factor intensities c Tax rates only 7 Stolper-Samuelson theorem relates price changes to what? a Government spending b Exchange rates c Real wages and rental rates of factors 8 In HO, which good does Home export when it is labor-abundant? a Labor-intensive X b Capital-intensive Y c Both goods equally 9 HO model assumes which of the following about technology? a Same technology in both countries b Different technologies c No technology considered 10 What happens to production in Home after trade begins, for X and Y? a Increase X, decrease Y (relative advantage) b Decrease X, increase Y c No change in production 11 Is entire factor price equalization observed in reality per HO? a Yes, fully equalized b Only in rich countries c No, not completely 12 What are two goods in the HO 2x2 model? a X (labor-intensive) and Y (capital-intensive) b A and B c Goods with identical inputs 13 Which curve shifts with a rise in PX/PY in HO? a Only RD shifts b No curve shifts c RS and RD interaction; RS shifts 14 What does the HO model predict about relative prices under trade? a Widening gaps b Random fluctuations c Convergence toward each other 15 Which country benefits overall from HO trade? a Only one country b Neither benefits c Both countries, on average 16 Which factor gains from trade according to HO? a Owners of scarce factors b Owners of abundant factors c Both equally gains regardless of endowment 17 How does HO explain why a country exports a good? a It is relatively intensive in its abundant factor b Because it imports everything c Because of random chance 18 Which model is also called 2x2x2 in HO literature? a The Heckscher-Ohlin model b Gravity model c Ricardian model 19 What is the main impact of HO trade on consumption? a No change in consumption b Reduced options c Increased consumption possibilities for both 20 What must differ between Home and Foreign to drive HO trade? a Factor endowments (L and K) b Currency only c Population size only 21 How does HO view the relationship between prices of factors and goods? a Inverse relationship only b Positive link: higher factor price ↔ higher relative goods price c No link

L4-5: HO Trade Insights

Froggy Jumps

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L4-5: HO Trade InsightsOnline version

by Emma

In HO, which factor endowment leads Home to export X, the labor-intensive good?

Which country exports the capital-intensive good Y under HO?

Which theorem predicts price convergence under HO trade?

Under HO, why do countries trade?

What does RS represent in HO diagrams?

What determines the HO trade pattern?

Stolper-Samuelson theorem relates price changes to what?

In HO, which good does Home export when it is labor-abundant?

HO model assumes which of the following about technology?

What happens to production in Home after trade begins, for X and Y?

Is entire factor price equalization observed in reality per HO?

What are two goods in the HO 2x2 model?

Which curve shifts with a rise in PX/PY in HO?

What does the HO model predict about relative prices under trade?

Which country benefits overall from HO trade?

Which factor gains from trade according to HO?

How does HO explain why a country exports a good?

Which model is also called 2x2x2 in HO literature?

What is the main impact of HO trade on consumption?

What must differ between Home and Foreign to drive HO trade?

How does HO view the relationship between prices of factors and goods?