c. Suppose that eqm C in India under FT is 8 tons of textiles and 2 airplanes. Check that this is possible under FT but not possible under autarky using the equations from part b. Does India gain from trade? How do you know? d. The “L theory of value” as discussed by Karl Marx in Das Kapital says that goods have intrinsic value equal to the amount of L embodied in them. “Unequal exchange” occurs when the L value of a country's X exceeds the L value of its imports. Calculate the L embodied in India's X. Now calculate the amount of US L embodied in India's M. Now value the amount of L embodied by the appropriate (nominal) wage. Does “unequal” exchange occur? Why or why not? Is the US “exploiting” India? Why or why not?
Parts C and D please
Assume that the world consists of two countries, the US and India. Technologies are as follows:
Hours required for production textiles India: 8
Hours required for production textiles US: 6
Hours of production for airplane India: 24
Hours of production for airplane US: 8
India is endowed with 96 hours of L. Let textiles be the numeraire: Pt =1, so Pa=relative price of airplanes=$ price of airplanes.
a. What is the range of possible values for the eqm (rel.) price of airplanes under free trade, FT?
b. Suppose the FT price of airplanes is 2. What is the equation that describes the set of possible Cbundles for
India under FT? Under autarky?
c. Suppose that eqm C in India under FT is 8 tons of textiles and 2 airplanes. Check that this is possible under FT
but not possible under autarky using the equations from part b. Does India
d. The “L theory of value” as discussed by Karl Marx in Das Kapital says that goods have intrinsic value equal to
the amount of L embodied in them. “Unequal exchange” occurs when the L value of a country's X exceeds the L value of its imports. Calculate the L embodied in India's X. Now calculate the amount of US L embodied in India's M. Now value the amount of L embodied by the appropriate (nominal) wage. Does “unequal” exchange occur? Why or why not? Is the US “exploiting” India? Why or why not?
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