If the United States unilaterally removed all of its trade restrictions and moved toward a policy of free trade, international trade theory indicates that
a. U.S. residents would gain, but people in other countries would be worse off.
b. people in other countries would gain, but U.S. residents would be worse off.
c. both U.S. residents and people in other countries would be able to achieve higher income levels.
d. the average income level would be lower in both the United States and other countries.
C
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A. is equal to B. could be greater than or less than C. is greater than D. is less than
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A) deficit; decreases B) surplus; increases C) deficit; increases D) surplus; decreases E) None of the above answers is correct. The figure above shows a nation's aggregate demand curve, aggregate supply curve, and potential GDP.
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