In the Dornbusch-Fischer-Samuelson graph in Question #24 above, a good that is located On the horizontal axis to the left of the point directly below the intersection of the A curve With the C curve will be exported by the __________ country, and, for this good,
__________.

Question

In the Dornbusch-Fischer-Samuelson graph in Question #24 above, a good that is located On the horizontal axis to the left of the point directly below the intersection of the A curve With the C curve will be exported by the __________ country, and, for this good, __________. A) home; a₂/a₁ < W₁/W₂ (or a₁/a₂ > W₂/W₁) B) home; a₂/a₁ > W₁/W₂ (or a₁/a₂ < W₂/W₁) C) foreign; a₂/a₁ < W₁/W₂ (or a₁/a₂ > W₂/W₁) D) foreign; a₂/a₁ > W₁/W₂ (or a₁/a₂ < W₂/W₁)

Quizplus · Accepted Answer

In the Dornbusch-Fischer-Samuelson model, a good located to the left of the point directly below the intersection of the A curve with the C curve indicates that the home country has a comparative advantage in producing this good. Therefore, it will be an exporter of this good. The correct inequality, a₂/a₁ > W₁/W₂, indicates that the home country's relative productivity in producing this good is greater than the world's relative prices, making it competitive in the global market.

In the Dornbusch-Fischer-Samuelson Graph in Question #24 Above, a Good