Assume a two-country, two-good, two-factor of production world with the countries being the United States and the Rest of the World, the two goods being steel and wheat, and the two factors of production being capital and land. If the United States was capital-abundant and steel production was capital-intensive, the Heckscher-Ohlin model would predict that the Rest of the World would export __________ and import __________.

Steel; wheat

Wheat; steel

Steel; steel

Wheat; wheat

Use the following information to answer questions 29 thru 35.

Assume a two-country, two-good, two-factor of production world where the following relationships hold:

(K/L)US > (K/L)ROW

(K/L)automobiles > (K/L)shoes

Where (K/L)US is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio in the Rest of the World, (K/L)automobiles is the capital-labor ratio in the production of automobiles, and (K/L)shoes is the capital-labor ratio in the production of shoes. Assume further that technology and tastes are the same in the United States and the Rest of the World.

If Country A is relatively abundant in labor and Country B is relatively abundant in capital, Heckscher-Ohlin's theory predicts that Country A will export relatively labor-intensive goods and Country B will export relatively capital-intensive goods.

True

False