Suppose That the Home Country in the Two­sector

question 122

Multiple Choice

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufactured output.
Which statement below best describes changes in
Returns on capital and land after trade occurs?

• A)The return on capital and land will both rise.
• B)The return on capital and land will both fall.
• C)The return on capital will rise and the return on land will fall.
• D)The return on capital will fall and the return on land will rise.

---

Definitions:

Interest Rate

The interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Currency

The system of money in general use in a particular country, facilitating the buying and selling of goods and services.

Federal Funds Rate

The interest rate at which banks and other depository institutions lend money to each other, usually on an overnight basis, which is determined by the Federal Reserve in the United States.

Money Supply

The full ledger of economic financial resources at a specific instance.