International Economics-Theories of International Trade [IEcoS (Economic Services) Economics Paper-2]: Questions 1 - 4 of 4

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Question number: 1

» International Economics » Theories of International Trade

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Appeared in Year: 2018

Essay Question▾

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State and prove Stopler-Samuelson theorem of international trade. What is the magnification effect?

Explanation

  • The H-O theory determined that the labour- abundant country specializes in the export of labour- intensive commodity while capital-abundant country specializes in the export of capital-intensive commodity.

    • The theorem developed by Stopler-Samuelson stated that commencement of free international trade would benefit the relatively abundant factor and

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Question number: 2

» International Economics » Theories of International Trade

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Appeared in Year: 2017

Essay Question▾

Describe in Detail

State the assumptions of Hecksher Ohlin model and explain the role each assumption plays in the derivation of the main results of the model.

Explanation

According to this theory, countries which are rich in labour will export labour intensive goods and those rich in capital will export capital intensive goods.

Assumptions of the model:

  • It considers a two-commodity, two-country and two factors case. It takes into account labour and capital. It is possible to extend this to multi-commodity and multi-fa

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Question number: 3

» International Economics » Theories of International Trade

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Appeared in Year: 2010

Essay Question▾

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“Despite merit, Hecksher Ohlin theory has some shortcomings”. Discuss.

Explanation

This theory is based upon highly over simplifying assumptions of perfect competition, full employment of resources, identical production function, and absence of transport costs. Because of these assumptions, this model becomes unrealistic.

  • This model assumes fixed quantities of factor of production, given the production functions, income and costs.

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Question number: 4

» International Economics » Theories of International Trade

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Appeared in Year: 2016

Essay Question▾

Describe in Detail

Explain and derive foreign trade multiplier.

Explanation

The foreign trade multiplier, also known as the export multiplier, operates like the investment multiplier of Keynes. It may be defined as the amount by which the national income of a country will be raised by a unit increase in domestic investment on exports.

  • In a country, an increase in exporters’ income will stimulate them to expand their product

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