Question 1 suppose that technological innovation increases, Ask an Expert

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Question: 1. Suppose that technological innovation increases a country's capital productivity. It has two industries with the characteristics shown inTable:

a. Which sector is capital intensive and which is labor intensive?

b. How will the production of each sector be affected by an increase in capital productivity? Explain why.

c. Which sector is exportable and which is importable?

d. How do you expect imports and exports to be affected by the increase in capital productivity? How will this change in trade be likely to affect the terms of trade?

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