Using Figure 1.5 above, we know the production of 2 units of soda and 2 units of pizza is 
A. impossible because we have the technology but do not have the resources.
B. possible, but there would be unemployed resources.
C. impossible because we have the resources but do not have the technology.
D. possible, but only if all resources were fully employed.
Answer: B
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Use the following graph to answer the next question.
If the initial equilibrium interest rate was 5% and the money supply increased by $100 billion, then the new interest rate would be
A. 1%. B. 2%. C. 3%. D. 4%.
Which of the following about potential GDP is true?
a. During a recession, actual GDP will exceed potential GDP. b. Actual GDP cannot exceed potential GDP, even for short periods. c. Actual output may be either above or below potential output depending on how fully resources are utilized. d. The economy's potential output is the maximum output that could be achieved temporarily during a time of economic boom.
Suppose that Paraguay and Guyana are both engaged in the production of soybeans and grapefruit, and that Paraguay has an absolute advantage in the production of both goods. If Guyana has a comparative advantage in the production of soybeans, then Guyana
A. should continue to produce soybeans, but only for domestic consumption, because trade is not a viable option. B. has a lower opportunity cost for producing soybeans, but specialization is not feasible because Paraguay has a lower monetary cost of soybean production. C. has a lower opportunity cost for soybeans, which means that it should specialize in production of soybeans and engage in trade. D. has a higher opportunity cost for soybeans, which means it should specialize in the production of grapefruit and engage in trade.
A nation's comparative advantage is determined by
A. the total cost of production. B. the quantity of resources required to produce a unit of output. C. the opportunity cost of producing an item relative to a trading partner's opportunity cost of producing the same item. D. specialization in the production of all goods.