Citizens of the country of Heehaw produce hay and provide entertainment services (banjo playing). In one year they produced $15 million worth of hay, with $11 million consumed domestically and the other $4 million sold to neighboring countries
They provided $7 million worth of banjo-playing services, $5 million in Heehaw, and $2 million in neighboring countries. They purchased $6 million worth of soda pop from neighboring countries. Calculate the magnitudes of GNP, GDP, net factor payments from abroad, net exports, and the current account balance.
GNP is output by citizens, which equals $15 million + $7 million = $22 million. GDP is output produced in the country, which equals $15 million (hay) + $5 million (domestic banjo playing) = $20 million. Net factor payments from abroad represent the difference between GNP and GDP; this is the $2 million paid for banjo playing in other countries. Net exports are $4 million (hay sold abroad) minus $6 million (soda pop imports) = -$2 million. (Note that banjo playing abroad is not part of GDP, so it is not part of net exports either.) The current account balance is net exports + net factor payments = -$2 million + $2 million = 0.
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Which of the following statements is false?
A) Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall. B) Although some individuals may not be made better off as a result of international trade, both countries may be made better off overall. C) Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off. D) Not all individuals in both countries are made better off as a result of international trade.
Adam Smith's idea of the "invisible hand" says that given a country's resources and its initial distribution of wealth, the use of markets will
A) insulate a nation from the effects of political instability. B) eliminate problems of hunger and dissatisfaction. C) eliminate inequalities between the rich and the poor. D) make people as economically well off as possible.
The statistical discrepancy
a. is always positive b. is always negative c. must be reduced to zero and eliminated from the balance of payments before the records become official d. is a residual factor that indicates the net error in the balance of payments data e. is a record of all transactions between residents of two countries over a specified period
Monopolistically competitive markets feature high barriers to entry.
Answer the following statement true (T) or false (F)