Theorem that states free trade leads to an increase in the income of nation's abundant factor is:
The Stolper-Samuelson theorem (1941) states that a rise in the relative price of a commodity increases the real return (income) of the factor used intensively in its…
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Theorem that states free trade leads to an increase in the income of nation's abundant factor is:
Answer and explanation
Correct answer A
The Stolper-Samuelson theorem (1941) states that a rise in the relative price of a commodity increases the real return (income) of the factor used intensively in its production and reduces the real return of the other factor. Because free trade raises the relative price of the exportable good produced intensively with the nation's abundant factor, free trade increases the real income of the abundant factor.
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RPSC Assistant Professor (College Education)