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(A) Explain the Dornbusch-Fischer-Samuelson (DFS) Model of Classical-Type Trade Between

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Essay

(a) Explain the Dornbusch-Fischer-Samuelson (DFS) model of Classical-type trade between two countries in a very large number of goods. Be sure to describe why each curve slopes as it does, and indicate the trading pattern at the equilibrium position.
(b) Now suppose that, from your equilibrium position in part (a) above, there is a uniform improvement in labor productivity in one of the two countries in all industries. (You can choose either country.) Illustrate and explain what happens to the trading pattern and to relative wage rates. Then explain the impact of the productivity improvement on real income in each country.


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Sex Chromosome

A chromosome in the shape of a Y (male) or an X (female) that determines the anatomic sex of the child.

Deoxyribonucleic Acid (DNA)

Genetic material that takes the form of a double helix composed of phosphates, sugars, and bases.

Cytosine

One of the four main nucleobases found in DNA and RNA, which pairs with guanine.

Guanine

One of the four main nucleobases found in the nucleic acids DNA and RNA.

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