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3) Ricardian model: doubling productivity In the Ricardian model, suppose that MPL is multiplied by two in both industries in the Foreign country (productivity increase).

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3) Ricardian model: doubling productivity In the Ricardian model, suppose that MPL is multiplied by two in both industries in the Foreign country (productivity increase). a) Illustrate what happens to the PPF. Does the slope change? b) How does the productivity increase affect relative prices in Autarky? c) Assume that the Foreign economy specializes in one industry, and suppose that the relative price remains the same before and after the productivity increase. How does the change in productivity affect the budget line? How does it affect its slope? d) Combining b) and c), by how much does the import demand curve for Foreign shifts upward or leftward

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