In a small open economy, the government decides to remove all trade barriers, transitioning from a protectionist stance to a completely free trade policy. Consider the Heckscher - Ohlin model in this context. A) How is this policy shift likely to affect the country's production and consumption patterns in the short term? B) What would be the expected impact on the distribution of income between the owners of the country's abundant and scarce factors of production? C) Discuss the potential long - term dynamic effects on the economy's growth and development. D) If the economy has a comparative advantage in labor - intensive goods, what kind of structural changes might you anticipate in the domestic industries as a result of this policy shift?

In a small open economy, the government decides to remove all trade barriers, transitioning from a protectionist stance to a completely free trade policy. Consider the Heckscher - Ohlin model in this context. A) How is this policy shift likely to affect the country's production and consumption patterns in the short term? B) What would be the expected impact on the distribution of income between the owners of the country's abundant and scarce factors of production? C) Discuss the potential long - term dynamic effects on the economy's growth and development. D) If the economy has a comparative advantage in labor - intensive goods, what kind of structural changes might you anticipate in the domestic industries as a result of this policy shift?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In a small open economy, the government decides to remove
all trade barriers, transitioning from a protectionist stance to a completely
free trade policy. Consider the Heckscher - Ohlin model in this context. A)
How is this policy shift likely to affect the country's production and
consumption patterns in the short term? B) What would be the expected
impact on the distribution of income between the owners of the country's
abundant and scarce factors of production? C) Discuss the potential long
- term dynamic effects on the economy's growth and development. D) If
the economy has a comparative advantage in labor - intensive goods,
what kind of structural changes might you anticipate in the domestic
industries as a result of this policy shift?

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