According to the law of comparative advantage,
a. individuals and nations gain when they specialize in producing those goods they consume.
b. individuals and nations gain when they specialize in producing goods they can produce at a high opportunity cost and can exchange for other desired goods they can produce cheaply.
c. individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can't produce as cheaply.
d. all of the above are true.
C
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When the growth rates of actual and potential GDP diverge, they usually diverge because
a. actual GDP growth equals potential GDP growth. b. actual GDP growth falls below potential GDP growth. c. potential GDP growth rates fall below actual GDP growth rates. d. potential GDP growth rates fluctuate while actual GDP growth rates remain stable.
Explain the purpose of payroll taxes. Is it a proportional form of tax?
What will be an ideal response?
High-wage workers are
A. more likely than low-wage workers to supply more labor when the wage rate rises. B. about as likely as low-wage workers to supply more labor when the wage rate rises. C. less likely than low-wage workers to supply more labor when the wage rate rises. D. about as likely as low-wages workers to supply less labor when the wage rate rises.
Shortly after it was established, the Eurozone found that it needed greater power to monitor and enforce discipline upon its members. In particular, which one of the convergence criteria needed closer monitoring?
A) no devaluation of a country's exchange rate B) an inflation rate no more than 1.5 percentage points higher than that in the three member countries with the lowest rates of inflation C) a government deficit of no more than 3% of GDP D) a long-term interest rate no more than 2 percentage points higher than in the three member countries with the lowest rates of inflation