Author Question: According to the human skills theory A) trade patterns depend upon a country's relative endowment ... (Read 122 times)

bcretired · **on:** Jun 30, 2018

According to the human skills theory

A) trade patterns depend upon a country's relative endowment of skilled workers.
B) countries with large endowments of skilled labor will have comparative advantage in skilled labor intensive products.
C) the Leontief paradox is explained by the fact that the United States is relatively skilled labor abundant.
D) All of the above.

Question 2

If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at ? Please explain with the aid of a figure.

What will be an ideal response?

Jmfn03 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

No, the rise in output leads to an excess demand for money. If the central bank does not increase supply to meet this demand, the domestic interest rate would rise above the foreign rate, R. This higher rate of return (and given expectations in the foreign exchange market) would cause the exchange rate to fall below .