Suppose that the U.S. government is trying to garner support from Central American countries to pass the newest free trade agreement, Central American Free Trade Agreement (CAFTA). Why might Central American countries argue that in terms of agricultural
products, trade with the United States is not really truly competitive?
What will be an ideal response?
The U.S. government still maintains a number of subsidies for American farmers, allowing them to offer their goods at lower market prices than Central American producers can offer theirs, since their government does not provide them with such subsidies. This allows American farmers to reap unfair gains should free trade be opened between the United States and Central America. It’s likely that Central American countries would argue for the establishment of those subsidies before they would be willing to open trade with the United States.
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
The government sets a price floor for corn which is above the equilibrium price of corn. As a result, ________
A) the corn market will be efficient B) a deadweight loss will be created C) a shortage of corn will be created D) none of the above answers is correct
If you are living in a period of continued high inflation on a fixed income, the cost of the goods and services you buy ____ and your nominal income ____
a. decreases, decreases b. increases, increases c. decreases, remains the same d. increases, remains the same
Which of the following are three key components of the economic problem?
a. scarcity; choice; giving up valuable opportunities b. surplus; choice; competing opportunities c. scarcity; competing opportunities; income d. surplus; income; giving up valuable opportunities