In the Factor Proportions Model,if the world relative price of textiles increases and Home country is a textile exporter,________.

Question

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The Factor Proportions Model suggests that if the world relative price of a good (in this case, textiles) increases, the country that exports that good (Home country) will specialize more in its production. Therefore, Home country will produce more textiles (to take advantage of the higher prices) and less of other goods, such as chemicals, which are not experiencing the same increase in relative price.

In the Factor Proportions Model,if the World Relative Price of Textiles