Explain how it is possible for a country to consume a greater quantity of goods and services than it is actually capable of producing.
What will be an ideal response?
It is possible for a country to consume more than it is actually capable of producing when countries engage in specialization and trade. When countries specialize in what they produce most efficiently (i.e., at lower opportunity costs), total world production is increased. We are essentially squeezing more goods and services out of the world's scarce resources. Trade then reallocates these goods and services based on the terms of trade. Trading countries will have more goods and services available for consumption than they can produce individually.
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How is the concept of present value useful in deciding whether or not to undertake an investment project?
What will be an ideal response?
If real GDP in 2002 is $10 trillion, and in 2003 real GDP is $9.5 trillion, then real GDP growth from 2002 to 2003 is
A) 0.5%. B) 5%. C) 0%. D) -5%.
In a repeated? game, deterring entry
A) is not possible.
B) is not a rational strategy if money is lost fighting the first potential entrant.
C) may require losing money fighting the first potential entrant.
D) cannot form a subgame perfect Nash equilibrium.
In which year was the link with Sterling finally broken?
(a) 1922; (b) 1923; (c) 1979; (d) 2002.