I attached links to the image of my questions below. thanks, Q1) http://s33.post

Question

I attached links to the image of my questions below. thanks, Q1) http://s33.postimg.org/akempnoj3/Screen_Shot_2016_06_01_at_9_29_51_PM.png part 2 of Q1) http://s33.postimg.org/4tzh8wr1r/Screen_Shot_2016_06_01_at_9_36_18_PM.png Agriculture products (A) are produced with land and labor, and manufacturing products (M) are produced using capital and labor. Labor is perfectly mobile between industries but cannot move internationally. Suppose there are two countries, Home and Foreign, that are identical except that Home has a larger endowment of labor than Foreign. The two countries are engaged in free trade. Given this scenario, is there any motive for capital to move internationally? If so, which direction would it move? Assume that the international prices of A and M do not change and that capital moves from Foreign to Home. What will FDI do to Home's level of production of M and of A? Show using the following diagram. What is the impact of this inward FDI on the real wage of labor, the real rental of capital, and the real rental of land in Home? How does the outward investment affect the real earnings of labor in Foreign?

Explanation / Answer

2) FDI will shift the PPF outside as there is more money in the country. Therefore, now they can produce more of both agriculture and manufacturing goods.

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