Question

Explain how the production-possibilities frootier of the unified Germany might differ from the PPF of the former Federal Republic of Germany (West Germany),keeping in mind that West Germany, in the two-factor context, was generally considered relatively capital abundant and the German Democratic Republic (East Germany) was generally considered relatively labor abundant. What would theory suggest about the differences in relative output of capital intensive goods and labor-intensive goods of the former West Germany compared with the unified Germany? What would theory suggest, if anything. about the rade pattern of the new Gemany compared with that of the former West Germany if it is assumed that the former West Germany was capital abuadant relative to its trading partners?

Answer 1

Answer:

Question 6)

Nominal rate of Good C=0%

Nominal rate of Good H=0.5*100/400=12.5%

Nominal rate of Good J=2.5*10/100=25%

Goods	Nominal Rate	Nominal Rate Ni	Value Vi
A	10%	0.1	400
B	5%	0.05	600
C	free	0%	500
D	30%	0.3	300
E	2%	0.02	200
F	2.50%	0.025	400
G	15%	0.15	100
H	$0.5/unit	12.50%	400
I	40%	0.4	200
J	$2.5/unit	25%	100

A) unweighted average nominal rate =$\sum Ni/10$

So unweighted average nominal rate=142%/10=14.2%

B) weighted average nominal rate =$(\sum Vi*Ni)/(\sum Vi)$

So unweighted average nominal rate=344/3200=10.75%