1. Consider a small country like Canada which produce two goods: manufacturing and food products. Assume it exports manufacturing products (the capital intensive good) and imports food.

Suppose now that the Canadian government would like to increase the share of labor used in the manufacturing sector (i.e. decrease K/L used in manufacturing) while keeping full employment of the factors of production, what should the government do? Should it find a policy that contributes to increase, to decrease or to do nothing regarding the production of manufacturing goods? Explain your reasoning and use graph as appropriate.