What happens to the rental rate of land

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Suppose the land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors. If there is an influx FDI into the country (increasing the amount of capital that is available), holding the prices of agriculture and manufacturing goods constant, what happens to the wage rate? What happens to the rental rate of capital? What happens to the rental rate of land? Explain your answer using the graph for the equilibrium in the specific-factor model.

Reference no: EM131876977

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