By specialization and trade, two individuals can
A) consume at a point beyond their individual production possibilities frontiers.
B) increase their comparative advantage.
C) increase their absolute advantage.
D) shift their individual production possibilities frontiers outward.
A
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Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary
An increase in demand will cause the equilibrium price and quantity to rise, ceteris paribus
Indicate whether the statement is true or false
A lawn mower costs $500 in the US and 8188 Mexican Pesos in Mexico. The current exchange rate is 1USD=12.97MXN. At this rate,
a. The good costs more in the US b. The good costs more in Mexico c. The good costs the same across the two countries d. None of the above
Assume individuals consider only the medium run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose individuals expect future taxes to decrease. Given this information, individuals will expect
A) an increase in the expected future interest rate and no change in expected future output. B) an increase in the expected future interest rate and an increase in expected future output. C) an increase in the expected future interest rate and a reduction in expected future output. D) an increase in the expected future interest rate and an ambiguous effect on expected future output.