An "omitted variable" is
A) a variable which is purposely omitted from an economic analysis.
B) a variable which is inadvertently omitted from an economic analysis.
C) a variable that has no impact on other variables in an economic analysis.
D) a variable that affects other variables and its omission from economic analysis can lead to false conclusions about cause and effect.
Answer: D
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Refer to the figure above. If this country is labor abundant, then according to the HO theory good X should be ________ intensive
A) capital B) labor C) both capital and labor D) Can't tell without more information
Which of the following statements regarding the cheap foreign labor argument is correct?
a. If there is an abrupt change in foreign competition that severely penalizes American workers, the U.S. government should immediately adopt protectionist measures. b. In the long run, labor will be cheap (wages are low) in those nations where labor is most productive. c. If workers in other countries are willing to supply their products with little compensation, this must ultimately raise the standard of living of the average American worker. d. American workers can never suffer from foreign competition since our monetary and fiscal policies always produce high employment at home.