How does the two-good, two-country version of the Ricardian model differ from the two-country, many-good model in terms of the determination which goods are produced and exported by each country?
What will be an ideal response?
In the two-good-two-country version of the Ricardian model, comparative advantage is totally determined by physical productivity ratios. Changes in wage rates in either country do not change physically determined comparative advantages, and therefore cannot affect which product will be exported by which country.
However, when there are more than two goods in the two-country model, changes in wage rates in one or the other country can in fact determine which good or goods each of the countries will export. The physical productivity definition of comparative advantage employed in the two-good model becomes ambiguous. Instead, changes in relative wage rates will alter international competitiveness along the "chain of comparative advantage."
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Jeremy purchases a bond that pays $600 in interest. If Jeremy paid $9,000 for the bond, what is the interest rate? If Jeremy paid $10,000 for the bond, what is the interest rate? How did a rise in the price of the bond affect the interest rate?
What will be an ideal response?
Consider an industry that produces an output Q with marginal private cost (MC) and marginal social cost (MSC) as given in the table:
Q MC MSC 1 2 4 2 4 7 3 6 10 4 8 13 5 10 16 Which of the following is TRUE? A) The production of each additional unit results in a larger marginal external cost. B) The production of each additional unit results in the same marginal external cost. C) The production of each additional unit results in a lower marginal external cost. D) There are no marginal external costs associated with the production of this good.
Refer to Figure 2-7. Assume that in response to changing consumer demands, Apple cuts back on the production of self-driving automobiles and increases its production of traditional automobiles. This strategy is best represented by the
A) movement from K to L in Graph C. B) movement from F to E in Graph A. C) movement from G to J in Graph B. D) movement from J to H in Graph B.
The required reserve ratio is:
a. the minimum amount of reserves the Fed requires a bank to hold. b. the interest rate that the Fed charges banks who borrow from it. c. the interest rate on loans made by banks to other banks. d. the maximum percentage of the cost of a stock that can be borrowed from a bank, with the stock offered as collateral. e. an appeal by the Fed to banks, asking for voluntary compliance with the Fed's wishes.