Assume Germany and Italy can be described by Heckscher Ohlin model. Assume that each nation produces cars and porcelain. Suppose Germany is relatively capital abundant and Poland is relatively labour

Assume Germany and Italy can be described by Heckscher Ohlin model. Assume that each nation produces cars and porcelain. Suppose Germany is relatively capital abundant and Poland is relatively labour abundant. Also assume that production technology of cars is capital- intensive, while porcelain is produced through a labour intensive technology. In the table below, indicate the effect of free trade on the variables listed in the two columns: + the variable increases – the variable decreases 0 the variable does not change A the variable change is ambiguous Effects of Free Trade:- In Germany In Poland Price Ratio (Pcar/ Ppor) Output of Cars Output of Porcelain Exports of Cars Imports of Porcelain Factor Price Ratio (W/r) Fill out the table for germany and italy

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