Question
Please help me with this questions. Thank you in advance. Consider the trade of rice and chemicals between the U.S. and Japan in the previous
Please help me with this questions. Thank you in advance.
Consider the trade of rice and chemicals between the U.S. and Japan in the previous question.
a. Assume that we had a lot of rain in Japan during the last year which caused a growth in the rice industry. Show the effect of this change on the production possibilities frontier for Japan. Can we explain this change using the Ricardian model?
b. How does this change can affect the RS-RD model of Japan? Use the terms of trade for Japan as relative prices in your graphing model; does it increase or decrease?
c. How does this change in terms of trade for Japan affect the welfare of the U.S. consumers? Is this an export-biased growth or an import-biased growth?
d. Assume that the U.S. has lost parts of the lands used for rice farming due to a natural disaster. Show the effect of this change on the production possibilities frontier for the U.S. Can we explain this change using the Heckscher-Ohlin model?
e. How does this change can affect the RS-RD model of the U.S.? Use the terms of trade for the U.S. as relative prices in your graphing model; does it increase or decrease?
f. How does this change in terms of trade for the U.S. affect the welfare of Japan consumers?
Any help will be appreciated. Thank you in advance
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