Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. Vernon can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. It follows that
A) Michael has the comparative advantage in producing X and Vernon has the comparative advantage in producing Y.
B) Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X.
C) Neither Michael nor Vernon has a comparative advantage in producing X.
D) Neither Michael nor Vernon has a comparative advantage in producing Y.
E) There is not enough information to answer the question.
B
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Which of the following correctly explain Ricardian equivalence?
a. Government spending that is financed by borrowing has a smaller effect on the economy than government spending financed by raising taxes. b. Consumers do not base current spending on future expected tax liabilities. c. Government borrowing can function like increased current taxes, reducing current household and business expenditures. d. The government should balance its budget by equating revenue and expenditure in every fiscal year. e. Government spending does not crowd out private investment.
Which of the following most accurately describes the aggregate supply curve?
a. It shows the price level associated with firms' unit costs and markups for any level of GDP. b. It is the sum of all individual firms' supply curves. c. It is determined by the federal government. d. It shows firms' unit costs for each level of GDP. e. It shows the equilibrium level of GDP corresponding to each price level.
Before 1970 the United States generally had a trade ________ and since 1970 the United States has generally run a trade ________.
A. deficit; deficit B. deficit; surplus C. surplus; deficit D. surplus; surplus
Starting from long run equilibrium, in response to a decrease in aggregate demand:
A. The price level will increase more in the long run than in the short run. B. The short run equilibrium level of real output will be greater in the long run than in the short run. C. Neither the price level nor real output will change in the long run. D. The price level will fall and rGDP will also fall if the demand falls.