If Congress were to pass a law exempting interest on saving from taxation, the:
A. supply of loanable funds would decrease and the equilibrium interest rate rise.
B. supply of loanable funds would increase and the equilibrium interest rate fall.
C. demand for loanable funds would increase and the equilibrium interest rate rise.
D. equilibrium interest rate would be unaffected.
Answer: B
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At market equilibrium
A) shortages are greater than surpluses. B) surpluses are greater than shortages. C) quantity demanded equals quantity supplied. D) demand equals supply.
Suppose that in Germany, the opportunity cost of producing a gallon of beer is 5 gallons of wine. In Italy, the opportunity cost of producing a gallon of beer is 3 gallons of wine
a. What is the opportunity cost of producing a gallon of wine for Germany? b. What is the opportunity cost of producing a gallon of wine for Italy? c. Which country has a comparative advantage in the production of beer? d. Which country has a comparative advantage in the production of wine?