India and Pakistan each produce only wheat and rice. Domestic prices are given in the following table:

Question:

Wheat Rice India 400 INR/kg 700 INR/kg Pakistan 600 PKR/kg 900 PKR/kg

If 1 Indian Rupee (INR) = 1 Pakistani Rupee (PKR),

a. Which country has an absolute advantage in the production of wheat? Rice?

b. Which country has a comparative advantage in the production of wheat? Rice?

c. If India and Pakistan were the only two countries in trade, what adjustments would you predict assuming exchange rates are freely determined by the laws of supply and demand?

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Principles Of Macroeconomics

ISBN: 9781292303826

13th Global Edition

Authors: Karl E. Case,Ray C. Fair , Sharon E. Oster

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Question Posted: Dec 16, 2023 01:17 AM

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India and Pakistan each produce only wheat and rice. Domestic prices are given in the following table:

Question:

Wheat Rice India 400 INR/kg 700 INR/kg Pakistan 600 PKR/kg 900 PKR/kg

Step by Step Answer:

Principles Of Macroeconomics

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