Let Us Define the Real Wage as the Purchasing Power

question 23

Multiple Choice

Let us define the real wage as the purchasing power of one hour of labor.In the Ricardian 2X2 model,if two countries under autarky engage in trade then

• A) the real wage will not be affected since this is a financial variable.
• B) the real wage will increase only if a country attains full specialization.
• C) the real wage will increase in one country only if it decreases in the other.
• D) the real wage will rise in both countries.
• E) the real wage will fall under pressure of international competition.

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Definitions:

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