Which One of the Following Is NOT an Assumption Made

question 14

Multiple Choice

Which one of the following is NOT an assumption made in the standard 2x2x2 Heckscher-Ohlin analysis?

• A) The production function for a given good is the same in both countries.
• B) If a particular good is the relatively labor-intensive good at one set of relative factor Prices, then it is also the relatively labor-intensive good at any other set of relative Factor prices.
• C) A given relative commodity price ratio, say (P_X/P_Y)₁, can be associated with more than One relative factor price ratio, e.g., say with (w/r)₁ as well as with (w/r)₂.
• D) Tastes and preferences (i.e., the community indifference curve maps) are identical in the two countries.

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Definitions:

Inflationary Expectations

The anticipation by consumers and businesses of future inflation, which can influence economic behavior such as spending, saving, and investment.

Potential GDP

The maximum output an economy can produce without triggering inflation, if all resources are fully employed.

Active Approach

A strategy in investment or management that involves ongoing, dynamic decision-making and actions in order to achieve specific objectives.

Economic Stability

Economic stability refers to a state where an economy experiences steady growth, low inflation, and minimal unemployment.