Question

Country A can produce two goods: good X is labor-intensive and good Y is labor-intensive. As a result of international trade the relative value of Px / Py increases. Which goods will country A import and which will it export? Does he have a lot of capital or work?

Answer 1

Both goods are originally labor intensive, so we can conclude that the country has a lot of labor resources, while their capital resources should be rather limited. Since the world price of good X increases compared to the price of good Y, then the country will export larger amounts of good X since its price is relatively higher.