Free trade means that nations can buy and sell goods from each other
a. unless absolute advantage favors one nation
b. without government interference, e.g., tariffs and quotas
c. without having to abide by comparative advantage
d. and choose their own level of tariffs against each other
e. according to their own national quotas
B
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Capital inflows occur if foreign interest rates are greater than domestic interest rates
Indicate whether the statement is true or false
Suppose consumer confidence declines and as a result, consumer spending decreases by $4 billion dollars
Other things equal, if households spend $0.75 of each extra dollar of income and save the remaining $0.25, by how much will spending decrease during the third round through the circular flow? A) $1 billion B) $2.25 billion C) $3 billion D) $4 billion