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Trade Now suppose that Home can trade with the rest of the world at some prices {pi W} and suppose that the world relative price
Trade Now suppose that Home can trade with the rest of the world at some prices {pi W} and suppose that the world relative price is p? E p?\" 1'ng : 1. (h) Repeat your calculations in parts (f]-(g) to determine real factor incomes under trade. (i) How does trade affect real factor incomes for [1) workers, [ii] owners of sector 1 capital, and (iii) owners of sector 2 capital? (Hint: your answer will depend on whether S % ). U) Explain the intuition for your ndings in part (i)
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