Two countries with differing comparative advantages may engage in trade because
A. They will be able to consume more goods in total due to specialization and trade.
B. They are required to because they are part of the World Trade Organization.
C. They will achieve an absolute advantage with one another.
D. They will be able to produce and consume goods on their production possibilities curves.
Answer: A
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Suppose that the interest rate is so low that banks currently refuse to make loans. An increase in the supply of high-powered money will
A) have no effect on the money supply if all the new high-powered money ends up as bank reserves. B) have no effect on the money supply if all the new high-powered money ends up as cash in the hands of the nonbank public. C) raise the money supply depending on banks reserve-holding ratio. D) All of the above are correct.
One of the reasons that price elasticities of demand are always stated as positive numbers is because:
a. the numerators and denominators of the formula are both negative. b. the numerators and denominators of the formula are both positive. c. price increases always lead to increases in quantity demanded. d. price decreases always lead to decreases in quantity demanded. e. price elasticities are always negative, so we ignore the sign.
Which of the following is true?
a. A budget deficit will reduce the national debt. b. A budget deficit will increase the national debt. c. A balanced budget will increase the national debt. d. A budget surplus will increase the national debt.
A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it, assuming it wants to raise revenue?
A. Reduce price, because if it reduces price and demand is inelastic, total revenue will increase. B. Continue selling at the same price, but increase the amount it produces. C. Increase price, because if it increases price and demand is inelastic, total revenue will increase. D. Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve.