Tests of the Heckscher-Ohlin Model by Bowen,Leamer,and Sveikauskas and by Maskus

question 9

Multiple Choice

Tests of the Heckscher-Ohlin model by Bowen,Leamer,and Sveikauskas and by Maskus continue to

• A)provide strong support for the theory.
• B)provide weak support for the theory.
• C)provide evidence against the theory.

Understand the effect of income changes on the demand for goods and services.

Distinguish between the concepts of price elasticity, income elasticity, and cross elasticity of demand.

Recognize how the proportion of a budget devoted to a product affects its price elasticity of demand.

Identify the relationship between the elasticity of demand and the nature of goods (necessities vs. luxury goods).

---

Definitions:

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures. YTM is considered a long-term bond yield expressed as an annual rate.

Semiannual Coupon Bonds

Bonds that pay interest to their holders twice a year.

Flotation Cost

The total costs associated with issuing new securities, including fees, taxes and underwriting expenses, which are incurred by companies when they raise new capital.

Public Offering Price

The price at which a company's shares are made available for sale to the public when it goes public.