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Assume two countries Home and Foreign with two factors of production: capital and labour. Each country produces two goods: books and widgets. Books are capital

Assume two countries Home and Foreign with two factors of production: capital and labour. Each country produces two goods: books and widgets. Books are capital intensive. Home is capital abundant. Assume the same technology in both countries.

Explain the effects of an increase in a) capital stock and b) labour supply in each country.

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