With eight hours of work Elmer can produce 20 pounds of carrots or 15 pounds of peas. With eight hours Bugs can produce 10 pounds of carrots or 7.5 pounds of peas. Can Elmer and Bugs gain from trade? Defend your answer
No, their opportunity costs are the same so neither has a comparative advantage.
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The above figure shows the market for neckties. Based on the graph, how much tax per necktie has been imposed by the government?
A) $1.25 per tie B) $1.00 per tie C) $0.75 per tie D) More information is needed to determine the tax that the government has imposed.
Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the president and Congress increased government purchases by $500 billion, what would be the result on the economy?
What will be an ideal response?
Based on the conventional view of fiscal policy and potential GDP in the long run, explain what happens to each of the following if the government runs a budget deficit:
a. the supply of loanable funds to the private sector b. long-term real interest rates c. the capital stock d. the investment rate e. potential GDP
Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium
What will be an ideal response?