When two countries specialize and trade with one another total production:
A. may increase, depending on trade relations.
B. and consumption remain unchanged.
C. increases, but only if comparative advantage exists.
D. remains unchanged but consumption rises.
Answer: C
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At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP
A) greater than B) equal to C) less than D) falling below E) None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion.
When there is a negative entry for unilateral transfers in the balance of payments, it means that
A) there must be an offsetting positive sign in the capital account. B) U.S. residents gave more to foreign residents than foreign residents gave to U.S. residents. C) U.S. residents purchased less services from foreign countries than foreign countries purchased from U.S. residents. D) U.S. residents purchased more services from foreign countries than foreign countries purchased from U.S. residents.