a. You work for the U.S. president and are tasked with understanding the effect of population aging in China on trade between China and the U.S. You are told that you can assume that China and the U.S. trade a continuum of goods produced with only labor in both countries. Markets are perfectly competitive and the unit labor requirements differ across goods and countries. Use a suitable diagram to illustrate the effect of a decline in labor L in China on a) the set of goods made in China; b) the relative (nominal) wage in the two countries. Explain the intuition behind your findings.

a. You work for the U.S. president and are tasked with understanding the effect of population aging in China on trade between China and the U.S. You are told that you can assume that China and the U.S. trade a continuum of goods produced with only labor in both countries. Markets are perfectly competitive and the unit labor requirements differ across goods and countries. Use a suitable diagram to illustrate the effect of a decline in labor L in China on a) the set of goods made in China; b) the relative (nominal) wage in the two countries. Explain the intuition behind your findings.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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