Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities frontiers for the two countries are shown in the graphs below.
Assume that prior to specialization and trade, Italy and Greece preferred points I and G on their respective production possibilities frontiers. As a result of complete specialization according to comparative advantage, the resulting gains in total output will be
A. 10 units of chemicals.
B. 5 units of steel and 15 units of chemicals.
C. 25 units of steel.
D. 15 units of steel and 5 units of chemicals.
Answer: B
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The notion that "no man produces but with a view to consume or sell,"
A. sums up Say's Law. B. can be restated as "supply creates it own demand". C. was said by David Ricardo, elaborating on Say's Law. D. All of the choices are correct.
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A. FABE. B. P1AB. C. EBC. D. FAC.
Commercial banks create money through
A. reducing risk in the economy. B. printing treasury notes. C. making loans. D. facilitating borrowing from the Federal Reserve to the public.