Which of the following statements is true for the two countries illustrated in Figure 35.1?
A. Japan has an absolute advantage in motorcycles, the United States in DVD players.
B. Japan has an absolute advantage in motorcycles.
C. The United States has a comparative advantage in DVD players.
D. The United States has a comparative advantage in motorcycles, Japan in DVD players.
Answer: C
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The demand for money that arises because holding money over short periods is less risky than holding stocks or bonds is called the
A) transactions demand for money. B) opportunity cost demand for money. C) liquidity demand for money. D) speculative demand for money.
According to a 2012 study of the crowd funding site Kickstarter, what percent of firms failed to meet the deadlines for finishing a product?
A) 25% B) 50% C) 75% D) 90%
The basic proposition in international trade is that
A) trade is determined by absolute advantage. B) in the long run, imports are paid for by exports. C) everyone is made better off by free trade. D) fair trade is more important than free trade.
To neutralize demand shocks, monetary policymakers shift the monetary policy reaction curve and thus effect changes in real interest rates to create offsetting changes in aggregate demand. However, in practice it is extremely difficult to keep inflation and output from fluctuating when aggregate expenditure changes. There are two reasons for this. First, it takes time to recognize what has happened. For example, changes in consumer or business confidence can be difficult to recognize as they are occurring. Second, the changes in interest rates that policymakers cause do not have an immediate effect on the economy. Thus, in theory, central bankers can neutralize aggregate demand shocks but in reality those shocks cause fluctuations in output and inflation.
a. True b. False