Describe some of the problems in testing the Heckscher-Ohlin theory
What will be an ideal response?
Leontief's test was incomplete because he did not have data on national factor endowments. He only looked at the relationship between factor intensities and trade flows. Recent tests by Maskus and Bowen, Leamer, and Sveikauskas incorporate factor endowments and still find evidence against the theory. However, their findings are based on assumptions about national technologies that may be incorrect. Moreover, data on factor endowments may not be very accurate.
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The declining trend in the currency-deposit ratio during 2007-2014 can be explained by
A) the increased holdings of U.S. currency by foreigners. B) bank panics. C) a drop in the rate of interest paid on checking deposits. D) the increasing use of debit cards.
A decrease in the value of the U.S dollar will tend to cause, other things the same ________
A) an increase in the volume of U.S. imports B) an increase in the volume of U.S exports and an increase in U.S. income C) an increase in the volume of U.S. exports and a decrease in U.S. income D) a decrease in U.S. income