1) The trade-to-GDP ratio for a nation that had S600 million in exports, $400 mi
ID: 1142152 • Letter: 1
Question
1) The trade-to-GDP ratio for a nation that had S600 million in exports, $400 million in imports, and GDP of $2,000 million would be A) 0.1 B) 0.2 C) 0.5 D) -0.1 2) A relative measure of the importance of trade is A) the dollar value of trade B) trade as a percentage of GDP C) the dollar value of trade adjusted for inflation. D) trade as a percentage of investment. 3) Since the end of World War II, A) world trade has grown more slowly than world GDP in the same time period B) world trade has grown more slowly than during the years leading up to World War II. C) the trade-to-GDP ratios of most countries have fallen D) world trade has grown more rapidly than world output Which of the following is true? A) Adam Smith proposed the theory of comparative advantage as the basis for trade in The Wealth of Nations. B) David Ricardo proposed the theory of absolute advantage as the basis for trade. C) Absolute advantage is based on comparing the opportunity costs of trading partners. D) The Ricardian model assumes labor is perfectly mobile The table below shows United States and United Kingdom production of wheat (bushels per hour) and cloth (yards per hour). Wheat Cloth 5) According to Adam Smith, which of the following is true? A) The United States has an absolute advantage in the production of wheat B) The United States has an absolute advantage in the production of cloth C) There is no basis for trade between these countries D) The United States will gain more from trade than the United Kingdom. 6) In order for both countries to gain from trade, one bushel of wheat must trade for A) between 6 and 18 yards of cloth. B) between 1/2 and 2 yards of cloth C) between 1/3 and 3 yards of cloth D) between 1/2 and 1/3 yards of cloth.Explanation / Answer
1. C. 0.5
Explanation: Trade to GDP ratio = total volume of trade / total GDP = (Exports + Imports)/total GDP = ($600 million + $400 million)/$2,000 million = $1,000 million/$2,000 million = 0.5
2. B
Explanation: Trade as a percentage of GDP reflects the size of the trade of a country with respect to its total economic output. This shows the relative importance of trade in the coiuntry.
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