Suppose that the opportunity cost of producing a rocking chair in Mexico is 50 basketballs and the opportunity cost of a rocking chair in Japan is 80 basketballs. Japan and Mexico can realize mutual gains if the terms of trade are
a. greater than 80 basketballs per rocking chair, and Japan produces rocking chairs
b. between 50 and 80 basketballs per rocking chair, and Japan produces basketballs
c. greater than 80 basketballs per rocking chair, and Mexico produces basketballs
d. less than 50 basketballs per rocking chair, and Japan produces basketballs
e. between 50 and 80 basketballs per rocking chair, and Japan produces rocking chairs
B
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
The coordination problem accompanying expansionary fiscal policy refers to
a. the tendency of increases in government expenditures to expand private sector output by an even larger amount. b. the possibility that demand stimulus programs will direct resources toward unproductive projects and areas of full employment. c. the possibility that borrowing to finance current spending will lead to lower future interest rates. d. the reluctance of Congress to approve increases in government spending during a recession.
Suppose Mexico has a comparative advantage relative to the United States in the manufacture of clothing and the United States has a comparative advantage in producing agricultural products. Which of the following is most likely to occur?
A) Mexico and the United States will not trade agricultural products or clothing. B) Mexico will sell clothing to the United States and the United States will sell agricultural products to Mexico. C) Mexico will sell agricultural products to the United States and Mexico will buy clothing from the United States. D) Mexico will sell clothing to the United States but not buy any agricultural products from the United States.
A monopolistic firm faces a continuously downward-sloping ________ curve.
A. marginal cost B. demand C. average total cost D. supply