Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that there are two goods: agricultural (A) and machinery (M), two factors: K and L, two countries Branzia and Gronia. Branzia is L-abundant. A

image text in transcribed

Assume that there are two goods: agricultural (A) and machinery (M), two factors: K and L, two countries Branzia and Gronia. Branzia is L-abundant. A is L-intensive. M is K-intensive. Initially, PA =1$ and PM=1$ and terms of trade is PA/PM=1. In Branzia, L=10000 and K = 2500. Branzia is a small economy. Explain the effects of the following changes in Branzi's economy. In answers, use the necessary graphical analysis methods. (Hint: Branzia is our home country in this question. Always put the agricultural good in the horizontal axis). a PA/Pm was 1. What happens if PA increases from 19 to 2$? Explain the effects on the economy. (10p) b) PA/PM was 1. What happens if PM increases from 19 to 1.50$? Explain the effects on the economy (10p) c) There is no change in the terms of trade. However, assume that both factors, K and L increase by 10%. Explain the effects on the economy (Hint: Unbiased growth). (5) * Use PPF, CIC curves and V line. Show changes in production and consumption mix equilibria and then in exports and in imports as we did in class. Explain each step. Don't forget answer each part with separate graphs

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

Discuss what is meant by quality control and quality improvement.

Answered: 1 week ago

Question

plagarism

Answered: 1 week ago