Question
Consider a world with 2 countries, A and B, and 2 goods, X and Y. Each country has an endowment of labor, L A in
Consider a world with 2 countries, A and B, and 2 goods, X and Y. Each country has an endowment of labor, L A in country A and L B in country B. Each country has technologies to produce the 2 goods. In country A the amount of labor required to make one unit of good X is aX and the amount of labor required to make one unit of good Y is aY. In country B, the analogues are given by bX and bY. Let c A X , c A Y denote the levels of aggregate consumption of each good in country A, and let q A X , q A Y denote the outputs of each good
- Suppose that aY > aX and bY > bX. In an equilibrium with free trade between the two countries, will it be the case that c A X > q A X , c A X < q A X , c A X = q A X , or is there not enough information?
- Now suppose that aY > aX and bX > bY. In an equilibrium with free trade between the two countries, will it be the case that c A X > q A X , c A X < q A X , c A X = q A X , or is there not enough information?
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Macroeconomics Principles and Applications
Authors: Robert e. hall, marc Lieberman
5th edition
1111397465, 9781439038970, 1439038988, 978-1111397463, 143903897X, 9781439038987, 978-1133265238
