Refer to above figure. In autarky, Country P was producing at point 5. With trade, would its production point be found above or below point 5? Explain why
What must happen in the K/L intensity ratio in the production of each of the products in this country when moving from autarky to free trade?
The point of production with trade will be above point 5. The country will be shifting its production composition to be more heavily weighted in labor intensive good, C. Within each industry, the production technique will be more capital intensive, since with the rising relative wage, the optimal point of production will involve sliding around the isoquants in the direction of saving on the now relatively more expensive labor.
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Which of the following best defines the vicious circle of poverty?
a. Countries are poor because of lack of education and training for workers. b. Countries are poor because of poor international credit. c. Countries are poor because of high population growth. d. Countries are poor because they cannot afford to save and invest.
If aggregate quantity supplied is greater than aggregate quantity demanded at a particular price level, then a
A) shortage exists and consumers will bid the price level up. B) surplus exists and consumers will bid the price level up. C) surplus exists and the price level will decline. D) shortage exists and the price level will decline. E) c and d
The conventional monetary policy to fight inflation would be to
A. increase the rate of monetary growth. B. decrease the rate of monetary growth. C. run budget deficits. D. run budget surpluses.
If the short-run Phillips curve were stable, which of the following would be unusual?
a. an increase in government spending and a fall in unemployment
b. an increase in inflation and a decrease in output
c. a decrease in the inflation rate and a rise in the unemployment rate
d. a decrease in the money supply and a rise in the unemployment rate.