According to the Classical Theory of International Trade

question 27

Multiple Choice

According to the classical theory of international trade

• A)only countries with low wages will export.
• B)only countries with high wages will import.
• C)countries with high wages will have higher relative prices of all goods.
• D)All the above are false.

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Definitions:

Taxes Rise

Taxes rise refers to the increase in the required contributions by individuals or corporations to government revenues.

Laspeyres Price Index

a measure of the change in the cost of purchasing a fixed basket of goods and services, relative to the cost of the same basket in a base period.

Demand Function

A mathematical expression showing the relationship between the quantity demanded of a good and its price, along with other determinants like income and prices of related goods.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.