The Central Prediction of the Hecksher-Ohlin Theorem Is That

question 15

Multiple Choice

The central prediction of the Hecksher-Ohlin theorem is that

• A) international goods prices equalize under foreign trade
• B) comparative advantages depend on the abundance of factor inputs
• C) international trade disperses technology, speeding convergence
• D) all nations move beyond their production possibilities sets with free trade
• E) exchange rates adjust to ensure purchasing power parity

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Definitions:

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value, reflecting the time value of money.

Present Value

The present value is the present-day valuation of a future money sum or cash flow series, determined by a given rate of return.

Simple Interest

A method of calculating the interest charge on a loan or financial product based on the original principal amount and the rate of interest over a specific time period, without compounding.

Interest on Interest

Earnings from reinvesting the interest received from an investment, leading to exponential growth over time.