1.1 Specialisation of trade is applicable to the Gravity Model of trade only. [7] 1.2 Under Autarky, specialisation of trade is possible for classical trade theory and Hecksher-Ohlin trade model. [)] 1.3 Given the Gravity model equation with a=b=c=0.7 and A=0.05 (see the appendix: found after question 4 for the Gravity model equation). Also, Country A and country B have $2 million and $3 million GDP, respectively, with 60000 meters between the two countries. Then value trade between country A and country B will is 2505.94. [5] 1.4 Given the Gravity model equation with a=b=c=2: The value of trade between two countries would double if the distance doubled. [4] 1.5 Leontiff paradox can possibly be explained by factor reversal and supply bias. [6] 1.6 Increases in the total amount of capital, land and labour results in the production possibilities curve frontier to shifting uniformly inwardly when analysing any changes in Hecksher-Ohlin model. [S]