MIDTERM

1.The flow of labor to the city and to the industrial sector provides a new loss to society. FALSE

2. Comparative advantage is a key insight that trade will still occur even if one country has an
absolute advantage in all products. TRUE

3. The Stolper-Samuelson theorem is a basic theorem in Heckscher-Ohlin trade theory that

describes the relationship between relative prices of output and relative factor rewards-
specifically, real wages and real returns to capital. TRUE

4.3 main kinds of industrial clusters are large metropolitan agglomerations, small groups of firms
with similar interests and clusters with a few main producers and their suppliers. TRUE

5. The primary work behind the Heckscher-Ohlin model was a 1919 Swedish paper written by
Eli Heckscher at the Stockholm School of economics. TRUE

6. Macroeconomic policies were generally supportive of agricultural development and the sector
was not “squeezed” as it was in some other developing region. TRUE

7. Korea is low in terms of government interventions and high in terms of FDI openness. FALSE

8.Agriculture provides a rich market for the output of the modern urban sector. TRUE

9. Most agriculture was rain fed in the early part of the 20th century. TRUE

10. Import substitution builds up an industrial base and technological abilities. TRUE

11. State of the art technology is more important than appropriate technology. FALSE

12. The Asian experience shows that there was also a shift, from the 1980s, to more “science”
based industries such as electronics, pharmaceuticals and biotechnology. TRUE

13. The cost of labor vary from one nation to another, so countries with cheap labor forces
should focus primarily on producing capital intensive goods, according to the Heckscher Ohlin
Model. FALSE

14. There was growth divergence between Asian NIEs and individual countries. FALSE

This study source was downloaded by 100000866540165 from CourseHero.com on 06-03-2023 01:19:10 GMT -05:00

https://www.coursehero.com/file/149311322/MIDTERM-EXAM-ECONpdf/
 15. Genetically modified organisms (GMOs) are becoming more important despite objections
from EU countries. TRUE

16. Flying geese paradigm is a view of Japanese scholars upon the technological development in
Southeast Asia viewing Japan as a leading power. TRUE

17. The greater the diversity in people and their skills, the greater the opportunity for beneficial
trade through comparative advantage. TRUE

18. Flying geese paradigm postulated that Asian nations will catch up with the West as a part of a
regional hierarchy where the production of commoditized goods would continuously move from
the more advanced countries to the less advanced ones. TRUE

19. Absolute advantage is a foundational principle in the theory of international trade. FALSE

20. Absolute advantage refers to the uncontested superiority of a country to produce a particular
good better. TRUE

21. Comparative advantage is an economy’s ability to produce a particular good or service at a

lower opportunity cost than its trading partners. TRUE

22. In Southeast Asia, industrialization began later and they had to rely on export earning from
primary products to begin the industrialization process. TRUE

23. The rapid rise of China both in terms of income and international trade has dramatically
changed the landscape of Asia. TRUE

24. Trading globally gives consumers and countries the opportunity to be exposed to goods and
services not available in their own countries, or which would be more expensive domestically.
TRUE

25. There is evidence from cross-country analysis that exports and outward orientation are
important determinants of rates of growth. TRUE

26. The effective rate of trade production is lower than the nominal tariff since it is computed
using value added as a base. FALSE

27. Hong Kong is low in FDI openness and high in terms of government intervention. FALSE

This study source was downloaded by 100000866540165 from CourseHero.com on 06-03-2023 01:19:10 GMT -05:00

https://www.coursehero.com/file/149311322/MIDTERM-EXAM-ECONpdf/
 28. Labor removed from agriculture does not affect output much since there is a surplus of labor
in the rural sector. TRUE

29. In the Ricardian theory of trade, difference in technology determine comparative advantage.
TRUE

30. In Asia, exports have shifted from light manufacturing include textiles, wood and paper
products and furniture to machinery, particularly electronics and telecommunications equipment.
TRUE

31. As income increases, share of agricultural value-added in GDP and as a source of

unemployment declines. TRUE

32. Terms of trade between the agricultural and industrial sectors will depend to some extent,
upon government policy. TRUE

33. The Hecksher-Ohlin model emphasizes the export of goods requiring factors of production
that a country has in abundance. TRUE

34. Adoption of modern technology was hastened by the risk averse behavior of small farmers.
FALSE

35. Growth of manufactured goods exports has stimulated intra-regional trade in Asia in very
much the same was as trade in the EU has expanded. TRUE

36. Compared with other regions, there are fewer formal mechanisms to facilitate regional
cooperation in Asia. TRUE

37. One method of facilitating entry into new business and of attracting overseas FDI is through
the set up of Special Economic Zones. TRUE

38. The Heckscher-Ohlin model takes the position that countries should ideally export materials
and resources of which they have an excess, while proportionately importing those resources
they need. TRUE

39. The Heckscher-Ohlin model emphasizes the benefits of international trade and the global
benefits to everyone when each country puts the most effort into exporting resources that are
domestically naturally abundant. TRUE

This study source was downloaded by 100000866540165 from CourseHero.com on 06-03-2023 01:19:10 GMT -05:00

https://www.coursehero.com/file/149311322/MIDTERM-EXAM-ECONpdf/
 40. The law of comparative advantage is popularly attributed to English political economist
David Ricardo. TRUE

41. Production gains are realized by a country specializing in the production of commodities that
it can produce at relatively high costs. FALSE

42. In East Asia, it has been generated internally and with the help of strategic alliances with
foreign firms. TRUE

43. South Asia did not participate in the flying geese paradigm until the 1990s, so it can be put
with the Mekong countries although it already had a strong domestic industrial base by the early
1980s. TRUE

44. A comparative advantage gives a company the ability to sell goods and services at a lower
price than its competitors and realize weaker sales margins. FALSE

45. Nations whether developed or underdeveloped trade with each other because trade is
mutually beneficial. TRUE

46. The Heckscher-Ohlin model is an economic theory that proposes that countries export what
they can most efficiently and plentifully produce. TRUE

47. Agricultural productivity in Asia exceed those of Latin America and Africa in the period
1975-1995. TRUE

48. The Stolper-Samuelson theorem was derived in 1941 from within the framework of the
Heckscher-Ohlin model by Wolfgang Stolper and Paul Samuelson, but has subsequently been
derived in less restricted models. TRUE

49. Other things equal, exchange rate appreciation brings greater international competitiveness.
FALSE

50. Agriculture has never been and will never be a major source of investment and capital
formation. FALSE

51. Flying geese paradigm was developed in the 1930s, but gained wider popularity in the 1960s
after its author Kaname Akamatsu published his ideas in the Journal of Developing Economies.
TRUE

This study source was downloaded by 100000866540165 from CourseHero.com on 06-03-2023 01:19:10 GMT -05:00

https://www.coursehero.com/file/149311322/MIDTERM-EXAM-ECONpdf/
 52. As industrialization proceeded, so did the movement of labor from rural to urban areas.
TRUE

53. Asia’s astounding agricultural productivity presents a key link to the chain of development
that led to Asia’s economic failure. FALSE

54. Innovation and technology transfer takes place most often when capital equipment and
components are imported by export oriented manufacturing firms. TRUE

55. Improved farm extension is needed to ensure that new developments in seeds, crop rotation
and new varieties can be spread to farmers efficiently and quickly. TRUE

56. In Asia, the export push began in labor intensive goods and moved to electronics and other
science based exports. TRUE

57. Labor intensive innovation can take place when technical change is based on skill intensive
industries. TRUE

58. Taxes on trade distort the workings of the free market and work to nullify comparative
advantage. TRUE

59. Countries may gain economies of scale from specialization, experiencing long run average
unit cost increases as output increases. FALSE

60. The theory of comparative advantage helps to explain why protectionism is typically
unsuccessful. TRUE

This study source was downloaded by 100000866540165 from CourseHero.com on 06-03-2023 01:19:10 GMT -05:00

https://www.coursehero.com/file/149311322/MIDTERM-EXAM-ECONpdf/
Powered by TCPDF (www.tcpdf.org)