Question

1) Income Inequality in the United States, measured using the GINI income of income inequality, is higher than in Guatemala

a)True

b)False

2) Country A is capital abundant. According to the Stolper-Samuelson Theorem... *(many can apply)

*Country B will a comparative advantage at Soybeans, a capital intensive good

*Country A will a comparative advantage at Textiles, a labor intensive good

*Labor unions will lobby the legislator to block trade liberalizations, since free trade tends to harm the scarce factor

*Labor unions will lobby the legislator to promote trade liberalizations, since free trade tends to benefit the scarce factor

Answer 1

Solution:

1] True

Income Inequality in the United States, measured using the GINI income of income inequality, is higher than in Guatemala

The Gini coefficient is a measure of inequality of variance. It is often applied to measure inequality of incomes in a particular area. A score of "0" on the Gini coefficient represents complete equality, i.e., every person has the same income.

2]

D] Labor unions will lobby the legislator to block trade liberalizations, since free trade tends to harm the scarce factor.

Because scarce factors usually get higher factor income, therefore, in case of increased liberalization cheap imports from other countries would distort the market setting of labor-intensive products as they would not be able to compete with cheap import because of scarce nature of labor that is used intensively in product making.