| Chapter 4 |
Consider the DFS model described in chapter 4. |
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Graph the following curves by clicking here |
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a.
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Graph the A curve. Why is it downward sloping? |
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b.
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Graph the C curve. Why is it upward sloping? |
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c.
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Mark
on your graph the equilibrium values of relative wages and goods.
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| d. | Suppose an increase in demand for country 2's goods occurs, leading to an increase in country 2's relative wage (and therefore a decrease in country 1's relative wage). How does the C-curve shift? Demonstrate this change on your graph, labeling the new curve C¢. Will country 1 export more or fewer goods? | |
View
graphing answers to question 1 by clicking  |
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| View
text answers to question 1 by clicking |
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| Now start a new DFS graph. | ||
| 2. | Graph the following curves by clicking here | |
| a. | Graph the A curve. | |
| b. | Graph the C curve. | |
| c. | Mark on your graph the equilibrium values of relative wages and goods. | |
| d. | Suppose technological improvement in country 2 causes a decrease in labor requirements (a2) there. How does the A-curve shift? Show this change on your graph, labeling the new curve A¢. Will country 1 export more or fewer goods? | |
| View
graphing answers to question 2 by clicking |
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View
text answers to question 2 by clicking
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