Why do you suppose that South-South trade does not conform in volume, but does conform in pattern with expectations generated by the Heckscher-Ohlin model?
What will be an ideal response?
The pattern of trade is generally observed to conform to the Heckscher-Ohlin models expectations. That is, the developing countries tend to export labor-intensive goods, such as textiles, and import capital-intensive goods such as machinery. The volume however is quite lower than what would be expected from the Neoclassical model. There are many possible reasons, such as financial crises necessitating premia in the financing of this trade.
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At the end of last year the Consumer Price Index was equal to 157.5 and at the end of this year it was equal to 163.8. What is the inflation rate over this time period?
A) 6.3 percent B) 4.0 percent C) 3.85 percent D) 10.1 percent
Refer to the diagram where D and S are the United States' demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the United States' balance of payments is in equilibrium. Under a system of flexible exchange rates, the shift in demand from D to D' will:
A. ultimately reduce U.S. exports and raise U.S. imports.
B. cause the dollar to appreciate.
C. cause the Swiss franc to depreciate.
D. cause the dollar to depreciate.