Penelope Pundit, an economics reporter, states that the European Union (EU) is increasing its productivity very rapidly in all industries. She claims that this productivity advance is so rapid that output from the EU in these industries will soon exceed that of the United States and, as a result, the United States will no longer benefit from trade with the EU.

a. Do you think Penelope Pundit is correct or not? If not, what do you think is the source of her mistake?

b. If the EU and the United States continue to trade, what do you think will characterize the goods that the EU sells to the United States and the goods that the United States sells to the EU?