Arrange the following theories in correct chronological order, starting from the earliest to latest:
(A) Absorption approach
(B) Factor Price Equalisation theory
(C) Reciprocal Dumping Model
(D) Leontief Paradox
(E) Immiserizing Growth Theory
Choose the correct code from the following;

Correct option is A

Correct Answer: (a) ​(B), (A), (D), (E), (C)

Explanation:

The correct chronological order of the trade theories is as follows:

• Factor Price Equalisation Theory (B): While the Heckscher-Ohlin model dates to the 1930s, Paul Samuelson rigorously proved the FPE theorem in 1948. It is a fundamental corollary of the H-O theory.

• Absorption Approach (A): Proposed by Sidney Alexander in 1952, this approach analyzes the Balance of Payments in relation to national income and domestic absorption.

• Leontief Paradox (D): Wassily Leontief published his famous findings in 1953 (using 1947 data), challenging the validity of the H-O theory for the US economy. 

  Immiserizing Growth Theory (E): Formulated by Jagdish Bhagwati in 1958, describing a situation where growth leads to a deterioration in terms of trade that outweighs the gains.

• Reciprocal Dumping Model (C): Developed by Brander and Krugman in 1983, this is a cornerstone of "New Trade Theory," incorporating imperfect competition.

Information Booster:

• Leontief Paradox: It revealed that despite being capital-abundant, the U.S. exported labor-intensive goods and imported capital-intensive goods, contradicting the Heckscher-Ohlin theorem.

• Absorption Equation: Defined as B = Y - A, where B is the trade balance, Y is national income, and A is total domestic absorption (C + I + G). It suggests devaluation only works if it increases income or reduces absorption.

• Immiserizing Growth: This phenomenon is most likely to occur in developing nations when export demand is inelastic, causing a sharp drop in terms of trade.

• Reciprocal Dumping: Occurs in oligopolistic markets where firms sell goods in each other's markets at prices lower than domestic prices to capture market share, often leading to two-way trade in identical products.