ECO201 - CHAPTER 2

Approximately what percent of all world production of goods and services is exported to other countries?

• 30%

  
  

  
  

• 50%

• 90%

• 10%

The gravity model offers a logical explanation for the fact that

• trade in services has grown faster than trade in goods.

  
  

• trade in manufactures has grown faster than in agricultural products.

  
  

• Intra-European Union trade exceeds international trade by the European Union.

  
  

• trade between Asia and the U.S. has grown faster than NAFTA trade.

  
  

The gravity model suggests that over time

• world trade will eventually be swallowed by a black hole.

  
  

• the value of trade between two countries will be proportional to the product of the two countries' GDP

• trade between Earth and other planets will become important.

  
  

• trade between all countries will increase.

  
  

The gravity model explains why

• countries with oil reserves tend to export oil.

  
  

• capital rich countries export capital intensive products.

  
  

• European countries rely most often on natural resources.

  
  

• trade between Sweden and Germany exceeds that between Sweden and Spain.

  
  

  
  

According to the gravity model, a characteristic that tends to affect the probability of trade existing between any two countries is

• the number of different product varieties produced by their industries.

• their cultural affinity.

  
  

• their colonial-historical ties.

  
  

• the distance between them.

  
  

In general, which of the following do NOT tend to increase trade between two countries?

• the existence of well controlled borders between countries

  
  

• larger economies

  
  

• mutual membership in preferential trade agreements

  
  

• historical ties

  
  

We see that the Netherlands, Belgium, and Ireland trade considerably more with the United States than with many other countries.

• This is explained by the gravity model, since they do not share borders.

  
  

• This is explained by the gravity model, since these are all large countries.

  
  

• This is explained by the gravity model, since these are all small countries.

  
  

• This fails to be consistent with the gravity model, since these are small countries.

  
  

The two neighbors of the United States do a lot more trade with the United States than European economies of equal size.

• This is because these neighboring countries have exceptionally large GDPs.

  
  

• This is irrelevant to any inferences that may be drawn from gravity models.

  
  

• This is consistent with predictions from gravity models.

  
  

• This relates to Belgium's trade record with the U.S.

  
  

Which of the following does NOT explain the extent of trade between Ireland and the U.S.?

• historical ties

  
  

• cultural Linguistic ties

  
  

• Gravity Model

  
  

• large numbers of Irish-Americans

  
  

In the present, most of the exports from China are

• overpriced by world market standards

• manufactured goods.

  
  

• primary products including agricultural.

  
  

• technology intensive products.