Specialization in the production

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Show for each of the following 2 statements whether is true, false or uncertain (i.e. true only in certain circumstances which must then be specified). Your demonstrations should be as clear as possible while remaining brief. As a guide, each should have between 3 and 8 lines of explanation in addition to the relevant graphs and / or equations.

1. The factor endowments model predicts an increase in wealth inequalities as a result of openness to trade due to the increase in the return on capital.

2. The factor endowment model predicts that openness to international trade leads to increased increase in the relative price of the capital-intensive good in the relatively better-endowed country and a specialization in the production of the same good.

Reference no: EM133082589

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