Which of the following curves in the IS—LM model is vertical?
A) The IS curve
B) The LM curve
C) The FE line
D) The AD curve
C
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Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. Which of the following statements is true?
a. Brazil has a comparative advantage in producing coffee. b. Brazil has a comparative advantage in producing both coffee and sugar. c. Chile has a comparative advantage in producing both coffee and sugar. d. Neither Chile nor Brazil has a comparative advantage in producing coffee. e. Brazil has a comparative advantage in producing sugar.
Dove policies advocate
a. less stability in output if greater price stability can be achieved. b. more stability in output if greater price stability can be achieved. c. more stability in output even at the cost of more price instability. d. stable prices at any cost. e. more stability in tax revenues even at the cost of more unemployment.
According to the text, a rise in the interest rate
A. may either raise or lower consumer savings. B. will raise consumer savings. C. will lower consumer savings. D. will cause the rental cost of capital to decrease.
The optimal point on a production possibilities curve is achieved where:
A. the smallest physical amounts of inputs are used to produce each good. B. each good is produced at a level where marginal benefits equal marginal costs. C. large amounts of capital goods are produced relative to consumer goods. D. large amounts of consumer goods are produced relative to capital goods.