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Question:

Which of the following models of international trade asserts that differences in factor endowments are the primary source of comparative advantage?

A Heckscher‐Ohlin model
Explaination

• The Ricardian model asserts that differences in technology are the key source of comparative advantage.
• The Heckscher‐Ohlin model asserts that differences in factor endowments are the primary source of comparative advantage.
• The Fisher effect is directly related to the concept of money neutrality. It states that the real rate of interest in an economy is stable over time so that changes in nominal interest rates are the result of changes in expected inflation.