Question
) Home produces capital intensive manufactured goods and agricultural products. Suppose that FDI doubles the amount of capital in Home. Assuming constant returns to scale,
) Home produces capital intensive manufactured goods and agricultural products. Suppose that FDI doubles the amount of capital in Home.
- Assuming constant returns to scale, what happens to Home's production possibilities frontier (PPF) in the short run?
- What happens to the capital-labor ratio, MPL and wages in short run?
- What happens to the capital-labor ratio, MPL and wages in short run in long run?
- What happens to the free trade relative price of manufactured goods in long run? Why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Macroeconomics
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
8th Canadian Edition
134646355, 9780134842615 , 978-0134646350
