How can the outsourcing of jobs cause production possibilities to expand?
What will be an ideal response?
Businesses choose to outsource jobs or move production to other countries because labor is cheaper in other countries. The decrease in the cost of labor allows U.S. firms to earn greater profits. The profits can be used for new investment. It also allows U.S. workers to focus on more complex tasks and specialize in what they are best at doing (i.e., comparative advantage). The end result is higher productivity.
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A current account deficit
A) will not pose a problem, especially if it is accompanied by an expansionary fiscal policy. B) may pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. C) may still pose a problem, even if the borrowed funds are channeled into productive domestic investment projects. D) There is no relation between current account surplus and between savings and investment. E) will pose a problem because the country is borrowing funds from the rest of the world that it won't be able to pay back later.
In a fixed exchange rate system, the center country, to whose currency the other countries peg their exchange rate, will:
A) find it difficult to conduct autonomous monetary policy. B) find it difficult to conduct autonomous fiscal policy. C) easily implement monetary and fiscal policy to suit its economy. D) defer to advice from other countries in conducting its domestic policy.
According to the above table, which assumes that opportunity costs of producing goods X and Y are constant, which of the following statements is TRUE?
A. Holly will be willing to produce only good X and trade units of that good to Sherry as long as she receives less than 2.5 units of good Y in exchange. B. Holly will be willing to produce only good Y and trade units of that good to Sherry as long as she receives less than 0.4 unit of good X in exchange. C. Sherry will be willing to produce only good Y and trade units of that good to Holly as long has she receives less than 2 units of good X from her in exchange. D. Sherry will be willing to produce only good X and trade units of that good to Holly as long as she receives more than 0.5 units of good Y from her in exchange.
From the price-setter's point of view, the appropriate cost of a good is
A) the inventory cost. B) the marginal cost. C) the sunk cost. D) the wholesale cost.