The Effect of Trade on Income Distribution

question 13

Multiple Choice

The effect of trade on income distribution

• A) can be significant in the sort run.
• B) is positive for all segments of an economy.
• C) is insignificant in the short run.
• D) implies that there are no real gains from trade.
• E) refutes the model of comparative advantage.

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Definitions:

Marginal Propensity

The fraction of an additional unit of income that is spent on consumption rather than being saved.

Consumption Function

The relationship in the economy between consumption and income, other things constant.

Saving Function

The relationship between the level of saving and the level of income, typically showing that saving increases as income increases.