If two countries engage in Free Trade following the principles of comparative advantage, then
A) neither relative prices nor relative marginal costs (marginal rates of transformation-MRTs) in one country will equal those in the other country.
B) both relative prices and MRTs will become equal in both countries.
C) relative prices but not MRTs will become equal in both countries.
D) MRTs but not relative prices will become equal in both countries.
E) trade will be unrestricted, regardless of relative costs and MRTs.
C
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The self-correcting tendency of the economy means that falling inflation eventually eliminates:
A. exogenous spending. B. recessionary gaps. C. expansionary gaps. D. unemployment.
Which of the following is most likely to increase an individual's future spending?
A) Paying back a loan in the future B) Borrowing money today C) Depositing money in the future D) Withdrawing money in the future
The use of common property resources:
A. reduces positive externalities in many cases. B. reduces negative externalities in many cases. C. leads to positive externalities in many cases. D. leads to negative externalities in many cases.
Which of the following would NOT cause the demand curve for bonds to shift?
A) a change in wealth B) a change in the price of bonds C) a change in the liquidity of bonds D) a change in expected inflation