If you are given the pre-trade relative prices of goods, what trading patterns will emerge, if...
If you are given the pre-trade relative prices of goods, what trading patterns will emerge, if any, between countries?
Homework Answers
On the basis of pre-trade relative prices of goods, it can be forecasted that a country having lower price of goods will export to the other nation and import those goods whose prices are higher in domestic market. It will bring a balance for another country as well and international trade between the two countries will take place. Further, the trade pattern will also depend upon the comparative advantage based upon the opportunity cost. A country with relatively lower opportunity cost and better comparative advantage will produce that good and export as well, while another country will produce another goods with lower opportunity cost and comparative advantage.
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If you are given the pre-trade relative prices of goods, what
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In the H-O model, when Home and Foreign trade, the relative goods prices converge in the two countries. wages in the two countries become equal. All of the above. trade in goods leads to the indirect exchange of inputs.
Suppose that trade volume between any pair of countries i and j, Tij, is given by the following gravity model: Tij = 2 * Yi * Yj/Dij Country GDP (Y) Distance from A Distance from B 12000 100 | 14000 100 21000 150 a) Suppose Z=0.005. What is the distance between A and C if the trading volume between A and B is the same as the trading volume between A and C? Show your working. b) Briefly explain why...
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