If Two Countries Are Very Different in Relative Factor Abundance,then

question 25

Multiple Choice

If two countries are very different in relative factor abundance,then empirical support for which of the following would less likely?

• A) the Factor Price Equalization Theorem
• B) the Heckscher-Ohlin Theorem
• C) the Law of One Price
• D) the Law of Demand
• E) the Gravity Theorem

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Definitions:

CPI

The Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

Real Wages

The purchasing power of wages, adjusted for inflation, indicating the quantity of goods and services that can be bought with a unit of labor.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, used as an indicator of inflation.

Real Wages

Wages or salaries that have been adjusted for inflation, indicating the purchasing power of the income received by workers.