The law of comparative advantage says that
a. the individual with the lowest opportunity cost of producing a particular good should produce it
b. comparative advantage exists only when one person has an absolute advantage in the production of two goods
c. whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good
d. whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good
e. gains from trade are possible only when one person has the comparative advantage in producing both goods
A
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Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and nominal value of the domestic currency falls. b. The real risk-free interest rate falls and nominal value of the domestic currency remains the same. c. The real risk-free interest rate rises and nominal value of the domestic currency remains the same. d. The real risk-free interest rate rises and nominal value of the domestic currency rises. e. There is not enough information to determine what happens to these two macroeconomic variables.
Economic theory suggests that the standard of living of American workers would rise if:
a. the minimum wage were doubled. b. older workers were forced to retire earlier, opening up jobs for younger workers. c. people bought only American products. d. the knowledge and skills of workers improved
Static tax analysis assumes that
A. an increase in a tax rate will lead to an increase in the tax base. B. an increase in a tax rate will leave the tax base unchanged. C. the tax base will always remain unchanged. D. an increase in a tax rate may lead to a decrease in the tax base.
The typical shape of an isoquant is
A) linear and upward sloping. B) convex towards the origin. C) concave towards the origin. D) linear and downward sloping.