Please discuss the volume effect and the value effect in regards to how the current account will move given a change in the real exchange rate
What will be an ideal response?
The volume effect takes place when consumer spending shifts on export and import quantities, while the value effect results when the domestic output worth of a given amount of foreign imports is changed. It is assumed that the volume effect outweighs the value effect, so that, other things equal, a real depreciation of the currency improves the current account.
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According to the Heckscher-Ohlin model
A) the gainers from trade could compensate the losers and still retain gains. B) everyone gains from trade. C) the scarce factor gains from trade and the abundant factor loses. D) a country gains from trade if its exports have a high value added. E) only the country with the more advanced technology gains from trade.
In economics, "capital" refers to
a. money b. stocks, bonds, and other financial assets c. the seat of government d. machines, buildings, tools, and knowledge e. net worth (assets minus liabilities)