Trade_PS2_2011

Trade_PS2_2011 - Economics 4431VInternational Trade Problem...

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Economics 4431V–International Trade Problem Set 2 Due: Beginning of Class, February 9, 2011 Consider world with countries. Country can produce traded good and a non- traded good that can only be consumed domestically. It has units of labor that can be allocated to producing the non-traded and traded goods. Let and denote the output levels of non-traded and traded goods of country . These must be in the production possibility set { (   ): , , 0  , + } Consumers have standard preferences, and markets are perfectly competitive. Let be the price of country ’s non-traded goods and the price of country ’s traded good, both expressed in some unit of account that is used throughout the world. The nominal wage in country is denoted by . a.
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Trade_PS2_2011 - Economics 4431VInternational Trade Problem...

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