Doubling K with trade in a large L-abundant nation:

Question

Quizplus · Accepted Answer

Doubling capital (K) in a labor-abundant (L-abundant) nation increases the nation's welfare by enabling it to produce more efficiently and potentially specialize in capital-intensive goods. This improvement in production efficiency and specialization can improve the nation's terms of trade, as it can now exchange its goods more favorably on the international market. Additionally, the change in production structure towards more capital-intensive goods may reduce the volume of trade, as the nation becomes more self-sufficient in certain goods or changes its trade patterns.

Doubling K with Trade in a Large L-Abundant Nation