Suppose there are two countries (Home and Foreign) that produce two goods. Home's wages are 100% greater than Foreign's wages. Will trade be possible between Home and Foreign?
a. No, because Foreign's wages are lower than Home's wages.
b. Yes, Foreign will be able to export both products to Home.
c. Yes, as long as Home's marginal productivity of labor in one product is at least 100% higher than Foreign's marginal productivity of labor in the same product.
d. No, because prices will be the same in each country.
Ans: c. Yes, as long as Home's marginal productivity of labor in one product is at least 100% higher than Foreign's marginal productivity of labor in the same product.
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Assume the government decides to reduce spending in order to reduce the budget deficit, which it financed by borrowing in the real credit market. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real goods market with aggregate demand shifting to the left. b. Start the analysis in the real goods market with aggregate demand shifting to the right. c. Start the analysis in the real goods market with aggregate supply shifting to the left. d. Start the analysis in the real goods market with aggregate supply shifting to the right. e. Start the analysis in the real credit market with demand for real credit shifting to the left.
Deadweight losses are associated with monopolistic competition:
a. In the short run, but not the long run b. In the long run, but not the short run c. In both the short and long run d. In neither the short run nor the long run