To eliminate a recessionary gap, Keynesian theory indicates that government should
A) increase taxes.
B) decrease taxes.
C) increase government purchases.
D) decrease government purchases.
E) b or c
E
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According to the Rybczynski theorem, if a country increases its endowment of capital and prices remain constant, then its output of both the capital and labor intensive goods will rise
Indicate whether the statement is true or false
If one country has the ability to produce all goods and services more efficiently than any other country, then:
A) there is no benefit to be derived from trading. B) there is still benefit to trading because the advantages to trade depend on comparative advantage and not on an absolute ability to produce more efficiently. C) it should not trade but should isolate itself from the less productive rest of the world. D) it must be a very large country.
Which of the following would likely cause the dollar to depreciate?
a) Rising interest rates in the United States. b) An increase in United State citizens' preference for foreign goods. c) Income growth of the United States lagging behind that of other countries. d) Lower inflation in the United States.
The theory which predicts that trade occurs because of differences in the availability of factor inputs across countries and the differences in the proportions in which the inputs are used in producing different products is called
A. the Heckscher-Ohlin theory. B. the theory of comparative advantage. C. the Stolper-Samuelson theory. D. the theory of factor price equalization.