Countries A and B have two factors of production, capital and labor, with which they produce two goods, X and Y. Technology is the same in the two countries. X is capital-intensive; A is capital abundant. Analyze the effects on the terms of trade and on the two countries' welfare of the following:

Countries A and B have two factors of production, capital and labor, with which they produce two goods, X and Y. Technology is the same in the two countries. X is capital-intensive; A is capital abundant. Analyze the effects on the terms of trade and on the two countries' welfare of the following: a) An increase in A's capital stock (2.5 marks) b) An increase in B's capital stock (2.5 marks)