N4

What predictions does the simple gravity model make for trade between (1) Spain and Ireland and (2) Ireland and the United States? Calculate the predicted and actual trade ratios. Comment on your findings given that the actual annual trade between Spain and Ireland is $5.5 billion and annual trade between Ireland and the U.S. is $60 billion. Note that Spain's GDP is $1.31 trillion, Ireland's GDP is $0.334 trillion, and the U.S.' GDP is 19.39 trillion. Note that the distance between Spain and Ireland is 1450 km. Note that the distance between Ireland and the U.S. is 6674 km.