a. You work for the U.S. president and are tasked with understanding the effect of population aging in China on trade between China and the U.S. You are told that you can assume that China and the U.S. trade a continuum of goods produced with only labor in both countries. Markets are perfectly competitive and the unit labor requirements differ across goods and countries. Use a suitable diagram to illustrate the effect of a decline in labor L in China on a) the set of goods made in China; b) the relative (nominal) wage in the two countries. Explain the intuition behind your findings.
a. You work for the U.S. president and are tasked with understanding the effect of population aging in China on trade between China and the U.S. You are told that you can assume that China and the U.S. trade a continuum of goods produced with only labor in both countries. Markets are perfectly competitive and the unit labor requirements differ across goods and countries. Use a suitable diagram to illustrate the effect of a decline in labor L in China on a) the set of goods made in China; b) the relative (nominal) wage in the two countries. Explain the intuition behind your findings.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter34: Globalization And Protectionism
Section: Chapter Questions
Problem 57P: The country of Pepperland exports steel to the Land of Submarines. Information for the quantity...
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