The Neoclassical Theory That Seeks to Explain Comparative Advantage in Terms

question 31

Multiple Choice

The neoclassical theory that seeks to explain comparative advantage in terms of factor abundance is the:

• A)Gravity Theory.
• B)Imperfect Market Theory.
• C)New Trade Theory.
• D)Hecksher and Ohlin model.

---

Definitions:

Exchange Rate

The rate at which one currency will be exchanged for another currency.

Absolute Purchasing Power Parity

The theory that in the absence of transaction costs and barriers to trade, identical goods will have the same price in different countries when expressed in a common currency.

Exchange Rates

The value of one currency for the purpose of conversion to another, impacting international trade and investment.

Absolute Purchasing Power Parity

A hypothesis positing that when there are no transportation or transaction expenses, the same products in various nations ought to be priced equally if priced in the same currency.