In a speech in 2009, President Barack Obama made the following observations: "I know that for many, the face of globalization is contradictory...Trade can bring new wealth and opportunities, but also huge disruptions and change in communities." How does trade bring "new wealth and opportunities"?
A. Countries that are more open to foreign trade and investment are more likely to receive foreign direct investment (FDI)
B. Countries that are more open to foreign trade and investment are more likely to receive foreign portfolio investment
C. Countries that are more open to foreign trade and investment experience wars and revolutions, which increase military contracts and military spending
D. Countries that are more open to foreign trade and investment experience low rates of saving and investment
E. A and B only
Answer: E. A and B only
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If expectations are adaptive, how will the economy adjust to a new long-run equilibrium in response to contractionary monetary policy? Support your answer with a graph of the Phillips curve
What will be an ideal response?
When a country has a lower opportunity cost in producing a good than any other country,
A. It has favorable terms of trade in producing the good. B. It necessarily has an absolute advantage in producing the good. C. Production possibilities are no longer limited. D. Consumption possibilities will increase with specialization and trade.
Figure 11.2Figure 11.2 shows demand and costs for a monopolistically competitive firm. At the profit maximizing output level:
A. the firm is earning a positive economic profit and more firms are expected to enter the market. B. the firm is earning a zero economic profit and no firms are expected to enter the market. C. the firm is earning a negative economic profit and more firms are expected to leave the market. D. There is not sufficient information.
Comparative advantage is based on the
A) concept that some countries are superior to others. B) concept of absolute advantage of producing goods in different countries. C) concept of relative opportunity cost of producing goods in different countries. D) concept that some countries are better endowed with natural resources.