Refer to above figure. Would you expect to find that the real wages become equalized in both countries? Explain the reason for any differences you note
What will be an ideal response?
We would expect that one single relative wage will be established for both countries. This happens because the two countries do not differ in relative factor availability by much, and hence a zone of overlap exists which allows for this result.
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The existence of the time inconsistency problem in macro policy suggests which of the following?
A) Use fiscal and monetary policy to fine tune the economy. B) Reduce the independence of the central bank. C) Appoint someone who is more conservative (economically) than the rest of the government to head the central bank. D) Intervene frequently in the foreign exchange market. E) Eliminate rational expectations from econometric models used for forecasting.
Emma uses a linear model to forecast quarterly same-store sales at the local Garden Center. The results of her multiple regression is: Sales = 2,800 + 200•T - 350•D where T goes from 1 to 16 for each quarter of the year from the first quarter of 2006 (‘06I) through the fourth quarter of 2009 (‘09 IV). D is a dummy variable which is 1 if sales are in the cold and dreary first quarter, and
zero otherwise, because the months of January, February, and March generate few sales at the Garden Center. Use this model to estimate sales in a store for the first quarter of 2010 in the 17th month; that is: {2010 I}. Emma's forecast should be: a. 5,950 b. 6,200 c. 6,350 d. 6,000 e. 5,850