Author Question: International trade leads to complete equalization of factor prices. Discuss. What will be an ... (Read 78 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?

Warfarin was developed as a consequence of the study of a strange bleeding disorder that suddenly occurred in cattle on the northern prairies of the United States in the early 1900s.

Did you know?

All adverse reactions are commonly charted in red ink in the patient's record and usually are noted on the front of the chart. Failure to follow correct documentation procedures may result in malpractice lawsuits.

Did you know?

Oxytocin is recommended only for pregnancies that have a medical reason for inducing labor (such as eclampsia) and is not recommended for elective procedures or for making the birthing process more convenient.

Did you know?

Patients who have been on total parenteral nutrition for more than a few days may need to have foods gradually reintroduced to give the digestive tract time to start working again.

Did you know?

The heart is located in the center of the chest, with part of it tipped slightly so that it taps against the left side of the chest.

For a complete list of videos, visit our video library