Explain how the law of comparative advantage does benefits developing countries.
What will be an ideal response?
Answer: A country has an advantage in the production of a good when this can be produced at a lower opportunity cost than its trading partner. According to this theory, as long as opportunity costs in two (or more) countries differ, it is possible for all countries to gain from specialisation and trade according to this idea. The global allocation of resources improves, resulting in greater global output and greater global consumption, allowing countries to consume outside their PPC.
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The velocity of money
A) is, according to the equation of exchange, equal to M/Y. B) indicates the number of times per year a dollar is spent on final goods and services. C) is, according to the equation of exchange, equal to P/M. D) indicates the speed with which the U.S. Treasury can mint new coins.
According to Baumol and Blinder, from the demand side, an increase in the price level causes aggregate expenditures to
A. fall, resulting in a lower level of equilibrium income. B. fall, resulting in a higher level of equilibrium income. C. rise, resulting in a higher level of equilibrium income. D. rise, resulting in a lower level of equilibrium income.
Two members of the Kenyan parliament from coffee-growing areas said that no firm should have a monopoly to market Kenyan coffee. The retail coffee company Tetu Coffee has sparked a storm in the industry by promising to earn the country Sh400 (Kenyan Shilling) billion annually if given exclusive licenses to market Kenyan coffee. The members of parliament said the coffee bean farmers should be free to sell their beans to the highest bidder. What would create a market with one buyer in the situation described?
A. Tetu Coffee has the ability to outcompete other coffee buyers. B. The government prohibits other buyers. C. There are economies of scope. D. There are economies of scale in purchasing coffee.
Comparing the European and the U.S. central bank systems, the Executive Board of the European system resembles:
A. the Board of Governors. B. the FOMC. C. the Presidents of the regional Federal Reserve Banks. D. the Chairman of the Board of Governors of the Fed.