If the production possibilities curves of two countries have the same slope,
a. neither has a comparative advantage, and there are no gains from trade.
b. although there is no comparative advantage, there are potential gains if there are differences in absolute advantage.
c. neither has an absolute advantage, and there cannot be gains from trade.
d. both have an absolute advantage, and can gain from trade.
a
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If the U.S. government removes tariffs it had placed on imports from countries that have been accused of deliberately undervaluing their currencies, the price of these imports will ________ and the demand for the undervalued currency will ________
A) fall; rise B) rise; rise C) rise; fall D) fall; fall
In order to smooth the influence of shocks throughout an economy, it is helpful for governments within a monetary union to have
A) ways to conduct fiscal transfers. B) seignorage. C) currency competition. D) monetary autonomy.
The figure above shows the market for tires. According to the figure, the price elasticity of demand is ________ the price elasticity of supply
A) greater than B) equal to C) less than D) not comparable to E) More information is needed to determine if the price elasticity of demand is greater than, equal to, less than, or comparable to the price elasticity of supply.
Which of the following statements is FALSE?
A) Fiscal policy is the attempt to influence the economy using taxes, transfer payments, and government expenditures. B) Government expenditure affects aggregate demand directly because government expenditure is a component of aggregate demand. C) Taxes and transfer payments affect aggregate demand by changing disposable income. D) An increase in disposable income leads to a decrease in aggregate demand.