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You have two countries I and II trading at some equilibrium. The two countries use two factors of production which are labor (L) and

You have two countries I and II trading at some equilibrium. The two countries use two factors of production which are labor (L) and capital (K) and they produce two goods which are export good and the import-competing good. Now if capital stock of one of the countries increases due to an influx of foreign capital, analyze clearly what happens to the trading relationships of the two countries.

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