Question

	In the two-sector (manufacturing and agriculture) specific-factors model, an increase in the price of the manufactured good will cause:
	A) a decrease in nominal wages in both the agricultural and manufacturing sectors.
	B) an increase in real wages in both the agricultural and manufacturing sectors.
	C) an increase in both nominal and real wages in both the agricultural and manufacturing sectors.
	D) an increase in nominal wages in both the agricultural and manufacturing sectors.

Which statement below is correct?

A) Between 2011 and 2014, there were more manufacturing workers displaced by trade than service workers displaced by trade.

B) Between 2011 and 2014, younger workers displaced by trade had larger losses than older workers displaced by trade.

C) Between 2011 and 2014, about 60% of manufacturing and service workers displaced by trade were reemployed.

D) Between 2011 and 2014, most service workers displaced by trade were reemployed in higher paying jobs.

Suppose that world demand shifts away from agricultural goods toward high-tech manufactured goods. If land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors, which of the following is true?

A) The percentage increase in capital income is less than the percentage increase in labor income.

B) The percentage increase in labor income is more than the percentage increase in the relative price of manufacturing goods.

C) The percentage change in capital income is greater than zero.

D) The percentage increase in returns to land is more than the percentage increase in the relative price of manufacturing goods.

Answer 1

Q : In the two-sector (manufacturing and agriculture) specific-factors model, an increase in the price of the manufactured good will cause:

Answer : OPTION D; an increase in nominal wages in both the agricultural and manufacturing sectors.

In the two sector model that is agricultural sector and manufacturing sector, if price of manufacturing goods increases it will cause the nominal wages in agricultural sector as well as manufacturing sector to increase. Nominal wage can be defined as the wages which is expressed in terms of monetary terms and it is not adjusted for inflation or changes in price.