-Refer to Above Figure

question 58

Essay

-Refer to above figure. Two countries exist in this model, P and R. P is relatively labor (L) abundant, as is evident in the bottom right horizontal axis. If Country P were to be completely specialized in the labor-intensive product, C, it would be producing at point 4. In fact, it produces both C and P, at point 5. The (autarky) relative price of C (in terms of
F) of Country P is at point 3; and of Country R at point If trade were to open up between these two countries, which would export C and which would export F? Is this consistent with the Heckscher-Ohlin model? Explain.

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Definitions:

GDP Deflator

An economic metric that converts the money-value measure of GDP from current prices to constant prices, enabling comparison of economic productivity and real growth over specific periods.

GDP Deflator

An economic metric that converts the money-value measure of GDP to an index for quantity comparison.

Nominal GDP

The total economic value of all finished products and services generated inside a country over a year, evaluated at present market prices.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced by a country in a given year, expressed in constant prices.