Suppose That, in a Classical Model with Two Goods, Germany

question 29

Multiple Choice

Suppose that, in a Classical model with two goods, Germany can produce 50 units of steel with one day of labor and 30 units of textiles with one day of labor; Switzerland can produce 45 units of steel with one day of labor and 45 units of textiles with one day of labor. If the exchange rate is fixed at 1 Swiss franc = 1 euro and if the Swiss wage rate is 10 francs per day, then, in trading equilibrium, German wages

• A) must be greater than 10 euros per day.
• B) must be less than 10 euros per day.
• C) must be equal to 10 euros per day.
• D) can be above, below, or equal to 10 euros per day - cannot be determined without More information.

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Definitions:

Ocean Basins

The deep and extensive depression of the Earth's surface that contains the world's ocean waters, surrounded by continental landmasses.

Counter Currents

Oceanographic phenomena where adjacent slivers of water move in opposite directions, significantly affecting climate and marine life.

Coriolis Effect

The apparent deflection of moving objects, like air or ocean currents, to the right in the northern hemisphere and to the left in the southern hemisphere, due to Earth's rotation.

Gulf Stream

A strong, warm ocean current that originates in the Gulf of Mexico, flowing into the Atlantic Ocean, influencing climate patterns in Europe and North America.