Textbook Problem

During the 1980s, 1990s, and the first decade of the 21st Century, the United States experienced a significant inflow of capital from abroad. For example, Toyota, BMW, and other foreign car companies built auto plants in the United States.

1. a. Using a diagram of the U.S. capital market, show the effect of this inflow on the rental price of capital in the United States and on the quantity of capital in use.
2. b. Using a diagram of the U.S. labor market, show the effect of the capital inflow on the average wage paid to U.S. workers.