Consider a Ricardian framework with two countries, A and B, and two products, G1 and G2. In autarky, the relative price of G1 is 1/3 in country A, and 2/3 in country B. At the trade equilibrium, there is no trade between A and B. country A receives higher real wage in terms of G1. the world relative price of G1 can be any value from 1/3 to 2/3, depending on the relative size of the countries. country B imports G2.

Consider a Ricardian framework with two countries, A and B, and two products, G1 and G2. In autarky, the relative price of G1 is 1/3 in country A, and 2/3 in country B. At the trade equilibrium, there is no trade between A and B. country A receives higher real wage in terms of G1. the world relative price of G1 can be any value from 1/3 to 2/3, depending on the relative size of the countries. country B imports G2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

In regulating the economy of a country, monetary and fiscal policies are needed to achieve economic balance. Based on this, explain how the two policies work to balance the economy in the targeted direction so that the similarities and differences between the two policies can also be seen.
In the Heckscher-Ohlin model with trade the wage in a country that produces both goods will depend on its labour abundance. True False
The neo-classical economists believe that export promotion and trade liberalization are synonymous because a) export promotion will not increase exports unless trade is liberalized b) both policies require the state to remove interventionist policies c) the best way to liberalize trade is to promote exports d) both policies increase economic growth e) the best way to promote exports is to liberalize trade
One of the main principles of the WTO involves reciprocity, an implicit or explicit arrangement for one government to exchange trade policy concessions with another A. True B. False
NAFTA has its positives and it’s negatives for all three countries. One effect would be the US and Canada moving production to Mexico because it is far cheaper. Moving production from the US to Mexico is moving from wages if $42-58 and hour to $8-10 an hour. Some may argue that this is taking advantage of Mexico. This allows for Mexico to the positive if inward investment and increases the employment. The US and Canada would benefit from the fact the citizens of Mexico now have more money to import goods from the US and Canada. Mexico, Canada, and China are now the three biggest countries the US does business with. Mexicos labor productivity increase by 50%. Within the first ten years all three countries have seen firm productivity growth. I think NAFTA is great for Canada, Mexico, and the US. Free trade, no tariffs on 99% of goods, removal of barriers, and protection of intellectual property rights. The only part I view as a red flag is the amount of jobs that are lost to Mexico. The…
Show how two countries can gain from trade in the Heckscher-Ohlin model (Make the nesccessary assumptions and show on a graph).
What is the main reason for trade in the Ricardian model? What is, in contrast, the main reason for trade in the Heckscher-Ohlin model?
The extent to which a national economy is involved in global trade: is not very strongly related to the issue of whether the economy has a substantial trade imbalance. O is not very strongly related to the underlying economic meaning of trade imbalances. is not very strongly related to either a or b above. is very strongly related to both a and b above.
QUESTION 3 In the Heckscher-Ohlin model with trade the wage in a country that produces both goods will depend on its labour abundance. True False
Suppose a country is experiencing a situation where output is above the full employment level of output and a trade deficit . Further , assume that the policy makers goals are to achieve full employment output and balanced trade . Given this information , what type of exchange rate and / or fiscal policy can be used to achieve simultaneously these two goals ? Explain .
Determine the short-run and long run equilibria in an economy under perfect capital mobility and fixed exchange rates. Does long run equilibrium require balanced trade?
Can question B be further explained? There is already an answer on Bartleby but I am unsure how the expert arrived at that answer.