We computed the Grubel-Lloyd index for Japan and each of other countries in the auto industry in class.

We found a ___ correlation between the Grubel-Lloyd index and the countries' income level.

Question

We computed the Grubel-Lloyd index for Japan and each of other countries in the auto industry in class.

We found a ___ correlation between the Grubel-Lloyd index and the countries' income level.

BlackTom AI · Accepted Answer

A positive correlation means that as a country's income level rises, its Grubel-Lloyd (GL) index in the automobile industry tends to rise as well.

Relevant concepts: The Grubel-Lloyd index measures intra-industry trade for a product or industry: GL = 1 − |X − M|/(X + M), equivalently GL = 2·min(X, M)/(X + M). GL ranges from 0 (purely inter-industry trade: only exports or only imports) to 1 (perfectly balanced exports and imports within the industry). Economic theory (product differentiation, economies of scale, and the Linder hypothesis) predicts that high-income countries, with diversified production and demand for differentiated varieties, engage in more intra-industry trade.

Step-by-step reasoning:
1. Compute GL for each country using observed auto exports (X) and imports (M). Use GL = 2·min(X, M)/(X + M).
2. Rank countries by income level and compare their GL values. Empirically, high-income countries typically show GL values close to 1, middle-income show intermediate GL, and lower-income show lower GL values near 0.
3. Illustrative numeric contrast: a high-income country with X = 500 and M = 450 gives GL = 2·450/(950) = 900/950 ≈ 0.947. A lower-income country with X = 600 and M = 50 gives GL = 2·50/(650) = 100/650 ≈ 0.154. This demonstrates how GL increases with more balanced two-way trade typical of richer countries.

Why the correct answer is correct: The calculated pattern from class (Japan compared to others) showed higher GL indices in higher-income countries, consistent with the theoretical mechanisms above. That observed association is a positive correlation: higher income → higher GL.

Why other possibilities are incorrect: A negative correlation would mean richer countries have lower GL (contradicted by both theory and observed GL values). A zero correlation would mean no systematic relationship (also contradicted by the observed ranking).

Conclusion: The observed relationship is a positive correlation, which matches the provided answer: positive.

We computed the Grubel-Lloyd index for Japan and each of other countries in the auto industry in class. We found a ___ correlation between the Grubel-Lloyd index and the countries' income level. Single choice

Similar Questions

Compute the Grubel-Lloyd index using the following data. Answer the number with one decimal (e.g., 0.14 ⟶ 0.1 and 0.15 ⟶ 0.2) in the box. Chinese exports to Korea Chinese imports from Korea Textiles 100 million dollars 180 million dollars

Which of the following is correct regarding the figure?

The figure shows that the IIT index is higher among high-income countries. This is because ...

A higher Grubel-Lloyd index means that there is a greater degree of ...

Which of the following is the best example of "intra-industry trade"? Check all that apply.

Which of the following is correct regarding intra-industry trade (IIT)?

Which of the following is the best example of intra-industry trade?

Choose A, B, C or D as the best answer.30. The author’s main argument is that __________.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler