1. a. Explain Adam Smith's theory of absolute advantage. b. How does Ricardo's theory of comparative advantage differ from the theory of absolute advantage? 2. What is the relationship between the Heckscher-Ohlin factor endowment theory and the theories in question 2? 1. Sovereign wealth funds and high reserves held by developing nations have changed the loan market for IMF and World Bank lending. How might these institutions adjust to a world in which fewer countries need their loans? 2. How and why did the WTO come into existence? Do you think bilateral trading agreements would work better than the multilateral WTO approach? Do such bilateral agreements as NAFTA and Mercosur undercut the WTO