Question: Problem 1 Given that any two countries in the world trade with each other, assume that each country's GDP has increased twice. How would

Problem 1 Given that any two countries in the world trade with each other, assume that each country's GDP has increased twice. How would you assess the world trade after this increase, considering provisions of the gravity model? Can we say that world trade will quadruple? Explain why. Provide numerical proof if necessary. Problem 2 Assume the total labor supply in a non-trading home economy is 1500 labor units. Manufacturing two goods only, home requires 3 units of labor to produce a pound of meat and 5 units of labor to produce a gallon of gasoline. (a) Define the opportunity cost of both goods. (b) What is the price of meat in terms of gasoline. (c) Derive the equation of production possibility frontier for this economy.

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