CFA Level I · CFA Level I Exam · International Trade
According to the Heckscher-Ohlin model, a country with abundant capital and scarce labor is most likely to:
The country would most likely export capital-intensive goods and import labor-intensive goods. The Heckscher-Ohlin model attributes trade patterns to differences in relative factor endowments, so a country exports goods that use its abundant factor intensively and imports goods using its scarce factor.
- Aexport capital-intensive goods and import labor-intensive goodsCorrect
- Bexport labor-intensive goods and import capital-intensive goods
- Cexport goods in which it has the highest labor productivity
Explanation
The Heckscher-Ohlin model says countries export goods intensive in their relatively abundant factor and import goods intensive in the scarce factor. Option B reverses this. Option C describes a Ricardian productivity-based explanation.
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