Question: AYEY} (20%) The simple gravity model is Ti}- = , where T}- }- is the trade value between country 1' and j, Y}- is U


AYEY} (20%) The simple gravity model is Ti}- = , where T}- }- is the trade value between country 1' and j, Y}- is U the GDP of country i, 1'} is the GDP of country j, Dijis the distance between country 1' and j, and A is a constant. Consider a world with three countries, X, Y, and Z. The GDP of country X is 100; the GDP of country Y is 50; and the GDP of country Z is 200. The distance between X and Y is 10; the distance between Y and Z is 20; and the distance between X and Z is 40. The trade value between country X and Y is 50. Based on the gravity model, what is the trade value between Y and Z? How about the trade value between X and Z
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