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A free trade equilibrium exist in which the United States exports machinery and imports clothing from the rest of the world. The goods are produced with two factors: capital and labor. The trade pattern is the one predicted by the H-O theory. An increase now occurs in the U.S. endowment of capital, its abundant factor.
a. What is the effect on the actual production quantities in the United States if the product price ratio is unchanged? Explain.
b. What is the effect on the actual production quantities in the United States if the product price ration is unchanged? Explain.
c. What is the effect on the U.S. willingness to trade? Explain.
d. Assuming that the U.S. growth does affect the international equilibrium price ratio, what is the direction of the change in the price ration?
e. Is it possible that U.S. national well-being declines as a result of the
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-Please visit his web page and either choose one of his recent video blogs to review or search for a blog that is specifically related to finance.
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