If labor productivities were exactly proportional to wage levels ...

[crazycityslicker]

If labor productivities were exactly proportional to wage levels internationally, this would
 
  A) not negate the logical basis for trade in the Ricardian model.
  B) render the Ricardian model theoretically correct but practically useless.
  C) negate the logical basis for trade in the Ricardian model.
  D) negate the applicability of the Ricardian model if the number of products were greater than the number of trading partners.
  E) demonstrate the validity of the Ricardian model.

Question 2

Explain the purpose of the following figure 14-2 from the text in the context of the interest rates on the dollar and the Japanese Yen between 1980 and 2010.
 
  What will be an ideal response?

[jjorrostieta]

Answer to Question 1

A

Answer to Question 2

Since the dollar and the Yen interest rates are not measured in comparable terms, they can move quite differently over time. Except for a period from 1990 to 1993 when the Yen interest rate was higher than the dollar, dollar interest rates have been higher than the Yen, indicating depreciation of the dollar against the Yen.