Suppose that the United States can make 15 cars or 20 bottles of wine with one year’s worth of labor. France can make 10 cars or 18 bottles of wine with one year’s worth of labor. From these numbers, we can conclude that
A. the United States has a comparative advantage in the production of cars.
B. France has a comparative advantage in the production of wine.
C. the United States has an absolute advantage in the production of cars.
D. All of the above are correct.
Answer: D
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Based on our understanding of the IS-LM model that takes into account dynamics, we know that a reduction in the money supply will cause
A) an immediate drop in Y and immediate increase in i. B) an immediate increase in i and no initial change in Y. C) a gradual increase in i and gradual reduction in Y. D) none of the above
In the short run, an increase in real GDP will
a. increase unit costs and increase the price level b. increase unit costs and decrease the price level c. decrease unit costs and decrease the price level d. decrease unit costs and increase the price level e. have no effect on unit costs or the price level