Using graphs to illustrate the concepts, absolute advantage
A. is shown with differences in slope of a production possibilities curve; comparative advantage is shown with a lower curve.
B. requires a very steep curve; comparative advantage requires a curve with a shallow slope.
C. on one good requires that the slope of the production possibilities curve be steeper for that good.
D. is shown with a higher production possibilities curve; comparative advantage is shown with differences in slope of the curves.
Answer: D
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A) increased; rising B) increased; falling C) decreasing; rising D) decreased; falling
An economist encounters some unexpected behavior in a market or laboratory setting. How can he or she distinguish between behavior resulting from mistakes by decision makers as opposed to being decisions based on unusual preferences?
a. If the same behavior is observed repeatedly even after opportunities to learn are provided, it is probably not a mistake. b. If the behavior is observed more often with inexperienced subjects, it is likely a mistake. c. Both a and b. d. It is impossible to distinguish between mistakes and unusual preferences empirically.
Think of the speculative motive for holding money: As the interest rate decreases from 10 percent to 5 percent, the quantity of money people will hold
a. decreases by some quantity, but not necessarily by 50 percent b. increases by some quantity, but not necessarily doubles c. remains unchanged d. doubles e. falls by 50 percent
Nominal GDP is:
a) the sum of all monetary transactions that occur in the economy in a year. b) the sum of all monetary transactions involving final goods and services that occur in the economy in a year. c) the amount of production that occurs when the economy is operating at full employment. d) money GDP adjusted for inflation.