The cost of producing a car in Germany is 2,000 bushels of wheat, and the cost of producing a car in Canada is 1,200 bushels of wheat. The two countries can both benefit if the terms of trade are
a. greater than 2,000 of wheat per car
b. less than 1,200 bushels of wheat per car
c. between 1,200 bushels and 2,000 bushels of wheat per car, and Germany produces wheat
d. between 1,200 bushels and 2,000 bushels of wheat per car, and Germany produces cars
e. between 1,200 bushels and 2,000 bushels of wheat per car, and Canada produces wheat
C
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Having a comparative advantage means a nation can
A) benefit from trade. B) produce at a higher opportunity cost. C) produce more of the good. D) produce without incurring an opportunity cost. E) produce the good at a point beyond its PPF.
Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If there is a surplus of motorcycles how will the equilibrium point change?
A) The equilibrium point will move from A to E. B) The equilibrium point will move from A to B. C) There will be no change in the equilibrium point. D) The equilibrium point will move from A to C.
If the prevailing price of shirts is $10 and at this price demanders demand 100 shirts while suppliers are willing to supply 110 shirts, there is a(n)
a. shortage at the $10 price. b. surplus at the $10 price. c. equilibrium in this market. d. shortage if price were to rise above $10.
Ambassador Bank has $5 million in deposits and $750,000 in reserves, with a reserve requirement ratio of 15 percent. If the Fed lowers the reserve requirement ratio to 12 percent, Ambassador Bank’s new excess reserves could potentially expand the money supply by ______.
a. $1,000,000 b. $150,000 c. $1,250,000 d. $250,000