In Lithasia, the opportunity cost of producing a chair is two tables and in Barylia, the opportunity cost of producing a chair is 1/2 table. Which of the following statements is true?
A) Barylia has a comparative advantage in producing chairs.
B) Lithasia has a comparative advantage in producing chairs.
C) Barylia has a comparative advantage in producing tables.
D) Lithasia has a comparative disadvantage in producing tables.
A
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Based on the transactions in the above table, what is the change in the U.S. current account balance?
A) $30,000 B) $31,000 C) -$32,500 D) -$32,700
The extremely low savings rate in the United States has forced us to borrow almost $____ billion a day to finance our federal budget deficit and trade deficit.
A. 1 B. 2 C. 3 D. 4
Suppose that Kansas farmers can grow wheat more cheaply than can Texas farmers. In the interest of efficiency, what is the desirable outcome?
A. Pass a law in Kansas mandating a minimum price for wheat equal to what is charged by Texas farmers. B. Allow the Kansas farmers to sell their wheat for a lower price. C. Pass a law in Texas mandating a maximum price for wheat equal to what is charged by Kansas farmers. D. Have Texas residents boycott Kansas wheat.
Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output. Which of the following will occur as a result of a revaluation?
A) The real exchange rate will be permanently higher in the medium run. B) The real exchange rate will be permanently lower in the medium run. C) The effects of this revaluation on the real exchange rate will be ambiguous in the medium run. D) The real exchange rate will be unchanged in medium run. E) The nominal exchange will initially fall in the short run and then increase in the medium run.