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Answer 1.

International factor movements refer to the movements of labor, capital, and other factors of
production between countries. There are three ways in which International factor movements occur:
immigration/emigration, capital transfers through international borrowing and lending, and foreign
direct investment. Workers in the domestic country have an incentive to move to the foreign country
until the real wages between the countries are equal.

Companies move factor of land, labor and capital because of absolute and competitive advantages that
they have in comparison to other companies. These advantages lead to greater profit to a company by
reducing cost, risk and increasing quality and efficiency. Shifting of resources also lead to economies of
scale.

Answer 2. Policymakers rely on international trade and factor mobility theories to help achieve
economic objectives. Brain drain occurs when educated citizens leave a country, but a nation may inturn
gain from the remittances that citizens who are working abroad send home. While immigrants add to
the base of a countrys skills, thus enabling competition in new areas, inflows of capital can be used to
develop infrastructure and natural and other acquired advantages, thus enabling increased participation
in the international trade arena. ? Countries trade in order to meet certain economic objectives, but
they struggle with questions on what, how much, and with whom they should trade. They need to
ensure that their decisions on what to produce make sense from an efficiency standpoint, and whether
there are ways to improve competitiveness. Participation in free trade enhances global efficiency.

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