When we teach comparative advantage in Intro Econ we assume barter exchange. We swap Canadian apples for US bananas. But the students, quite naturally, are thinking of monetary exchange. What happens if Canadian apples and bananas cost more dollars [to produce] than US apples and bananas? That's possible, isn't it? Wouldn't that mean [US prices for apples and bananas are lower than Canadian production costs of apples and bananas, so] there's a shortage of demand for all Canadian-produced goods, which causes unemployed resources in Canada?
The students are right, of course. That might happen. We need to talk about money. Unless exchange rates adjust, or resource prices (wages, rents) adjust in terms of money, it could happen.
But I can't think up a nice simple clean example where it does happen. All I've got is two nice simple clean examples where it doesn't happen. Hence the bleg.
Start with a very simple standard model:
Canada can produce one apple per hectare, or one banana per hectare. The US can produce two apples per hectare, or four bananas per hectare. Because the Americans have a better climate, or better land, or are just smarter than us. So the US has an absolute advantage over Canada in both apples and bananas.
Under autarky (no trade) the opportunity cost and price of an apple will be one banana in Canada, and two bananas in the US, so Canada has a comparative advantage in apples, because Canada has the lower opportunity cost of producing apples. And the US has a comparative advantage in bananas, because the US has a lower opportunity cost of producing bananas.
Traders buy where prices are low and sell where prices are high. When Canada discovers America, traders will take Canadian apples and swap them for bananas in the US, then return to Canada to swap those bananas for apples, and repeat, so Canada will export apples and import bananas, and this arbitrage will equalise Canadian and US prices.
If both countries specialise under free trade, the free trade price of apples will be somewhere between one and two bananas (and equal to one banana if only the US specialises, and equal to two bananas if only Canada specialises). If both specialise, both countries are better off, because their budget lines are now outside their Production Possibility Frontiers. If only one country specialises, that country is better off, and the other country is neither better off nor worse off.
Suppose both specialise and the price of apples is p bananas per apple, where 1 < p < 2.
What happens if we have monetary exchange instead of barter?
Suppose that both countries adopt the apple standard. One Canadian dollar equals one apple, and one US dollar equals one apple, so one Canadian dollar equals one US dollar. Under autarky, Canadian land will rent for $1 per hectare, and US land will rent for $2 per hectare. Under free trade, Canadian land will all be growing apples, and will still be earning $1 per hectare, but those dollars will now buy more bananas than before. Under free trade, US land will all be growing bananas, and will be earning $4/p per hectare. Since p < 2, US land rents will rise.
Now suppose instead that both countries adopt the banana standard. One Canadian dollar equals one banana, and one US dollar equals one banana, so one Canadian dollar equals one US dollar. Just like before. Under autarky, Canadian land will rent for $1 per hectare, and US land will rent for $4 per hectare. Under free trade, Canadian land will all be growing apples, and will now be earning $p per hectare. Since p > 1, Canadian land rents will rise. Under free trade, US land will all be growing bananas, and will still be earning $4 per hectare, but those dollars will buy more apples than before.
In both my examples, equilibrium land rents measured in dollars either rise or stay the same. So opening up for trade won't cause unemployed land even if exchange rates are fixed and land rents are sticky downwards.
A two factor model could give me an example where either rents or wages might need to fall. But I want to keep it simple.
(And when you teach first teach comparative advantage in Intro Econ, do you talk about money and exchange rates at all? I don't feel comfortable saying nothing, and telling students to wait till we do macro.)