In the Factor Proportions Model,suppose Home country is a labor-abundant country and Foreign country is a capital-abundant country,when trade between these two countries happens,the Factor Proportions Model indicates that ________.

Question

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According to the Factor Proportions Model, a labor-abundant country will have a comparative advantage in producing labor-intensive goods, while a capital-abundant country will have a comparative advantage in producing capital-intensive goods. When trade occurs between the two countries, the labor-intensive goods will be exported by the Home country, and the capital-intensive goods will be exported by the Foreign country. This will lead to an increase in demand for the Home country's labor-intensive goods, causing their price to rise. Conversely, a decrease in demand for the Foreign country's capital-intensive goods will cause their price to fall. Thus, the correct answer is B: the price of labor-intensive goods will rise in the Home country.

In the Factor Proportions Model,suppose Home Country Is a Labor-Abundant