8/17/2019 AnswerSheet4 Intl Econ

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Economics Department

International Economics

Third year, English Section

T.A: Marian Mekhael

Sheet no. 4

Q1: State whether each of the following statements is true or false with explanation: 

1.  Comparative static analysis analyzes the effect on the equilibrium position resulting from a

change in underlying economic conditions without regard to the transitional period or process

of adjustment. (T)

2.  Capital refers to all man-made means of production such as machinery, factories, buildings and

transportation but does not include the education and training of a nation’s labor force. (F)

3.  If labor and capital grow at the same rate, the nation’s production possibility frontier will not

shift. (F)

4.  If the endowment of labor grows with capital stock held constant, the output of the labor-

intensive commodity increases but the output of the capital-intensive commodity remains

unchanged. (F)

5.  When K doubles and L is held fixed, the output of Y (the capital-intensive commodity) is exactly

doubled. (F)

6.  The Hecksher-Ohlin theory states that an increase in the endowment of one factor will increase

by a greater proportion the output of the commodity intensive in that factor and will reduce the

output of the other commodity, holding commodity prices constant. (F)

7.  According to John Hicks, technical progress can be classified into two types: labor-saving or

capital-saving technical progress. (F)

Q2: Choose the right answer for each of the following statements: 

1. For X (the labor-intensive commodity) to double:

a)  Both L and K must double

b)  L must double while K should remain unchanged

c)  K must double while L must remain unchanged

d) 

Any of the above

2. After a nation faces balanced growth, the slope of its new production possibility frontier will be:

a)  The same as the slope of the old PPF

b)  higher

c)  lower

d)  It cannot be determined