12. The U.S., Italy, and France are major trading partners. Referencing the table, use the gravity equation model and the specified parameters (K = 93, a = b = 1 [GDP exponents, Y; and Y1, and c = 1.25 [trade cost exponent, t¿j]) to answer the following questions. Note: Similar to the U.S.-Canada example on the slides. Country GDP in 2012 ($ billions) Distance from U.S. (miles) France Italy United States 2,776 2,196 5,544 6,229 14,991 a. Calculate and contrast the expected amount of trade between the U.S. and Italy and between the United States and France. b. Using capitals as a reference point, the distance between Paris and Rome is 688 miles. Which country would you expect France to trade with more: Italy or the U.S.? Explain.

12. The U.S., Italy, and France are major trading partners. Referencing the table, use the gravity equation model and the specified parameters (K = 93, a = b = 1 [GDP exponents, Y; and Y1, and c = 1.25 [trade cost exponent, t¿j]) to answer the following questions. Note: Similar to the U.S.-Canada example on the slides. Country GDP in 2012 ($ billions) Distance from U.S. (miles) France Italy United States 2,776 2,196 5,544 6,229 14,991 a. Calculate and contrast the expected amount of trade between the U.S. and Italy and between the United States and France. b. Using capitals as a reference point, the distance between Paris and Rome is 688 miles. Which country would you expect France to trade with more: Italy or the U.S.? Explain.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter19: The Macroeconomic Perspective

Section: Chapter Questions

Problem 32P: In 1980, Denmark had a GDP of 70 billion (measured in U.S. dollars} and a population of 5.1 million....

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