Author Question: International trade leads to complete equalization of factor prices. Discuss. What will be an ... (Read 70 times)

ETearle

  • Hero Member
  • *****
  • Posts: 580
International trade leads to complete equalization of factor prices. Discuss.
 
  What will be an ideal response?

Question 2

Who are the main actors in the international capital market?
 
  What will be an ideal response?

Question 3

Refute the claim by mercantilists who claimed that without severe restrictions on international trade and payments, a country might find itself impoverished and without an adequate supply of circulating monetary gold as a result of balance of
 
  payments deficits.



matt95

  • Sr. Member
  • ****
  • Posts: 317
Answer to Question 1

This statement is typically true . . . but. Under a strict and limited set of assumptions, such as the original Heckscher-Ohlin model which excludes country specific technologies; non-homothetic tastes; factor intensity reversals; large country differences in (relative) factor abundances, more factors than goods, and an equilibrium solution within the cone of specialization; then it may be demonstrated that internal consistency demands that the above stated sentence is true. However, the minute one relaxes any of the above listed assumptions one may easily identify solutions, which contradict the factor price equalization theorem.

Answer to Question 2

(1 ) Commercial banks
(2 ) Corporations
(3 ) Non-bank financial institutions, such as insurance companies, pension funds, and mutual funds. This includes investment banks, which specialize in underwriting sales of stocks and bonds by corporations and in some cases governments.
(4 ) Central banks and other government agencies

Answer to Question 3

The balance of payments would automatically regulate itself to ensure an adequate supply of money in every country.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

The B-complex vitamins and vitamin C are not stored in the body and must be replaced each day.

Did you know?

The average human gut is home to perhaps 500 to 1,000 different species of bacteria.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates’s recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

Did you know?

During the twentieth century, a variant of the metric system was used in Russia and France in which the base unit of mass was the tonne. Instead of kilograms, this system used millitonnes (mt).

Did you know?

The familiar sounds of your heart are made by the heart's valves as they open and close.

For a complete list of videos, visit our video library