"When countries specialize in producing the good in which they have a comparative advantage and then trade with each other, only the country with the absolute advantage gains
" Is the previous statement correct or incorrect? Briefly explain your answer.
The statement is incorrect. Absolute advantage, which is essentially the ability to produce more of a good than another country, has nothing to do with the gains from trade. All nations gain from free international trade regardless of whether they possess an absolute advantage or not.
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If inflation is eight percent, a nominal interest rate of six percent translates into a real interest rate of two percent
Indicate whether the statement is true or false
When the economy is in a recession, the Fed can ________ the federal funds rate, which ________ aggregate demand and ________ real GDP
A) lower; increases; decreases B) raise; decreases; increases C) lower; increases; increases D) raise; increases; decreases E) lower; decreases; decreases
Economic fluctuations: a. are linked, but not perfectly synchronized, across countries
b. are perfectly synchronized across countries. c. in one country are independent of fluctuations in other countries. d. in the United States always occur after fluctuations in other developed economies. e. in the United States usually occur before fluctuations in other developed economies.
Suppose that a community seeks to preserve air quality, and zones a "green belt" around the city which prevents property development within the belt. What is the most likely result of this law?
a. Interest rates will increase. b. Labor income will increase. c. Economic rent will increase. d. Profits will increase.