How can comparative advantage yield gains from trade?
What will be an ideal response?
Comparative advantage refers to the ability to produce a good or service at lower opportunity cost compared to other producers. If nations specialize in producing goods in which they have a comparative advantage and trade at rates of exchange that are more favorable than the opportunity costs they would have faced without trade, then they can obtain more goods for consumption with trade than they could have obtained for consumption without trade. These consumption gains are the gains from trade.
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An increase in the discount rate by the Federal Reserve causes the money stock to expand
a. True b. False Indicate whether the statement is true or false
_____ is the practice of using extra resources to compete for obtaining monopoly, and leads to _____
a. X-inefficiency; a deadweight loss b. Rent seeking; a deadweight loss c. X-inefficiency; a loss in producer surplus d. Rent seeking; a loss in producer surplus
A major contributing factor to the instability of money demand over the past 25 years is the:
A. introduction of credit cards. B. introduction of financial instruments that pay higher returns than money but can be used as a means of payment. C. Fed has changed the way the money aggregates are defined. D. failure of many savings and loans.
Which of the following is the correct formula for the marginal propensity to consume?
A. MPC = 1 ÷ (1 - MP B. MPC = (total consumption) ÷ (total disposable income). C. MPC = 1 - MPS. D. MPC = (change in consumption) + (change in disposable income).