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Q. Use the diagram below taken from Figure 4-4 to identify the pre-trade situation for Australia and Sri-Lanka. Where on the K/L axis will you search each of the two countries? Which of the two countries has a higher relative wage, w/r? Which product is the labor intensive, and which is the land intensive one? Show where the relative price of cloth to food will be taken once trade opens between these two countries. Show where the relative wages of each will semms. Answer: You will search Sri-Lanka to the left of Australia on the K/L axis. Australia has a elevated relative wage. Food is the land intensive product and the relative price PC/PF is found among the two autarkic prices. The post trade relative wage is among the two autarkic ones on the vertical axis.
Q. Explain why price levels are lower in poorer countries. Answer: One theory explicate the difference in prices on different endowments of capital and employment Bhagw
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Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p
Q. Explain why the European Union's current combination of rapid capital migration with limited labor migration may actually raise the cost of adjusting to product market shocks wi
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Q. Using the GG - LL framework, analyze the effect of Libya subsidizing the Pakistani Nuclear programs. Answer: This will move the GG curve upward and to the left causi
Q. Define countertrade. Discuss the different forms of countertrade? Counter trade means all types of foreign trade in which the sale of goods to another country is associated
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