Question: Assume that there are two factors of production: labor and physical capital. When Japan opened to trade in 1860, we saw that Japan started to

Assume that there are two factors of production: labor and physical capital. When Japan opened to trade in 1860, we saw that Japan started to import rice, a labor-intensive good.

a.According to the Heckscher-Ohlin theorem, was Japan capital-abundant or labor-abundant? Please briefly explain.

b.What was the impact of opening trade on the real wage in Japan according to the H-O theorem?

c.What is the impact of opening trade on the real rental rate of capital (the return to capital) according to the H-O theorem?

d.Which group, capital owners or workers, would have supported policies that would limit free trade? Please briefly explain.

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