Divide the economy into two sectors: tradable (T) and non-tradable (NT). Both sectors can be described by "normal" production functions that depend on labor (L) and capital (K). If the tradable sector (T) is more capital intensive (K), a. Show on the planes (L vs. K) and (T vs. NT) the effects of the fall in the real exchange rate on relative prices and production incentives. b. What consequences would a global labor-saving technical change bring? c. Suppose that a gift is received from abroad and there are no changes in the price of tradable goods (??) or non-tradable goods (???). Come up with an explanation.

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