Author Question: If devaluation improves only the BOP, rather than the BOT, this implies that the capital account ... (Read 28 times)

SO00 · **on:** Jun 30, 2018

If devaluation improves only the BOP, rather than the BOT, this implies that the capital account must have improved following a devaluation.

Indicate whether the statement is true or false

Question 2

What is the Heckscher-Ohlin theorem? Using the case studies in the chapter on U.S. trade with China describe the theory and the resulting trade patterns that would support it.

What will be an ideal response?

batool · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

TRUE

Answer to Question 2

I would expect my students to address the following:
A clear statement of the HO Theorem along the lines that nations differ in their endowments of factors of production, products differ in how intensively they use various factors of production, so a nation that has a relative abundance in a specific factor of production compared to its trading partner will have a comparative advantage in products that use that factor of production more intensively.
The U.S. would have an abundance of capital and skilled labor and China unskilled labor. The text offers data that supports this.