What are the benefits and costs to a nation that participates in international trade? Do the benefits outweigh the costs or do the costs outweigh the benefits?
The benefits to a nation of specializing and trading with other nations along the lines of comparative advantage are the higher average absolute standards of living its people are able to enjoy. Prices are generally lower and there are a wider variety of more and higher quality products to consume. The costs to a nation include the loss of some businesses and some jobs. The evidence is clear that the benefits far outweigh the costs for a nation. This is why so many nations want to increase their participation in the global economy.
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Refer to the diagram. If net exports are X n2 , the GDP in the open economy will exceed GDP in the closed economy by:
A. AB.
B. AD.
C. FG.
D. BD.
Situation 4-1 During the winter of 1973-74, a general system of wage and price controls (including a price ceiling on gasoline) was in force in the United States. At the beginning of 1974, some oil-producing countries imposed an oil embargo (a legal prohibition on commerce) on the West. In the spring of 1974, price controls were abolished. Refer to Situation 4-1. An economist would have most
likely predicted that once price controls were abolished in the spring of 1974, A) the price of gasoline would decline sharply. B) the surplus of gasoline would go away. C) the shortage of gasoline would go away. D) the demand for gasoline would decrease. E) both c and d
The World Bank specializes in making loans to promote
A. short-term assistance when a nation experiences a financial crisis. B. financial stability. C. so-called stand-by arrangements and credits. D. long-term economic development.
Which of the following is NOT a determinant of the price elasticity of demand?
A. the share of the budget spent on the item B. the time the consumer has to adjust to the price change C. the availability of potential substitutes D. the cost to produce the product