Tentafrågor 2 Flashcards
What theorem is included in this model?
Factor price equalization (FPE-theorem) says that the prices of production factors converges between countries
What model says that good poduced using advanced technology will be exported?
Ricardian model
What models says that goods produced with economies of scale will be exported?
New trade theory (NTT)
What does return to capital mean?
Income generated by using capital such as machinery
What does return to labor mean?
This is the income of the workforce, usually measured in terms of wages and benefits
What does return to land mean?
The land generates returns as rent or the value of what is produced in the land
Which model says that countries trade if they have different technology?
Ricardian model
What is the primary purpose of the International Monetary Fund? (IMF)
To provide short term financial assistance to countries facing balance-of-payments problems
What is the main advantage of a country adopting a floating exchange rate system?
The central bank has greater control over domestic monetary policy (styrränta)
In the content of Trade policy, what is the purpose of and export subsidy
To encourage domestic producers to sell goods in the foreign markets
What is the concept of trade diversion in the concept of regional trade agreements?
When trade shifts from a more efficient exporter to a less efficient one within the trade bloc
According to Linder hypothesis, what determines the types of goods two countries trade?
Similarities in income levels and demand patterns
What are the key terms of trade balance?
Trade balance = Value of exports - Value of imports
Exports > imports = surplus
Imports > exports = deficit
What is the optimal tariff theory?
A tariff that maximizes a country’s welfare by exploiting its market power in international trade
What is the main purpose of a country using capital controls?
To stabilize exchange rates by restricting capital outflows or inflows
What is the primary cause of trade deficits?
Excessive government budget deficits
What does the twin-deficits hypothesis suggest?
That there is a link between a country’s government budget deficit and its trade deficit
Describe the key features in free trade area (FTA)
No tariffs or restrictions on food traded between members, but each country sets its own tariffs for non-members
Describe the key features in customs union
The members adopt a common external tariff for imports from non-member countries. They have the same trade policy toward non- members
What are the key features in a common market?
Builds on a customs union by allowing free movement of goods, services, labor and capital across member states. Removal of barriers to labor and capital mobility.
What is the trilemma about and what are the three goals?
The trilemma states that a country only can achieve two out of the following three goals
- Fixed exchange rate
- Free capital mobility
- Independent monetary policy
When does the trade balance improve according to the Marshall-Lerner condition?
The trade balance improves if the sum of the price elasticities of exports and imports is greater than 1
