Suppose that Japan and India are both engaged in the production of radios and rice, and that Japan has an absolute advantage in the production of both goods. If India has a lower opportunity cost for producing rice, then
A. India has a comparative advantage in the production of rice, but it is outweighed by Japan's absolute advantage in rice production.
B. India has a comparative advantage in rice production, but there will be no gains from specialization and trade.
C. Japan has a comparative advantage in the production of both goods.
D. India has a comparative advantage in the production of rice, and specialization and trade between the two countries can be mutually beneficial.
Answer: D
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Monetarists argue that the Federal Reserve should allow the money supply to grow:
A. counter to the business cycles. B. faster than 10 percent annually. C. only during recessions. D. at a constant rate.
If the seller knows more about the good than the buyer knows, there exists:
A. an externality. B. asymmetric information. C. moral hazard. D. a public goods problem.
In the short-run equilibrium in the AD/AS Model, the aggregate output may be less than, equal to, or greater than potential output
Indicate whether the statement is true or false.
The broadest indication of economy-wide inflation is captured by the
A) Consumer Price Index. B) Gross Domestic Product (GDP) deflator. C) Producer Price Index. D) Personal Consumption Expenditure Index.