Based on Scenario 1 above critically evaluate the following statement. "Because of the disparities in skills between these two men it will not be beneficial for them to trade with one another."
What will be an ideal response?
Despite the fact that the younger man has absolute advantage in all activities, it is not in the interest of either of them to work in isolation since they both can benefit from specialization and exchange. If the two men divide the work according to comparative advantage then the young man will specialize in tasks at which he is most productive, while the older man will concentrate on tasks where his productivity is only a little less than that of the young man. Such an arrangement will increase total production for a given amount of labor supplied by both men and it will benefit both of them.
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Suppose that the reserve ratio is 20 percent. A bank's customer deposits into her account $100,000 in funds from a check written on an account at another bank
The maximum potential increase in the money supply resulting from this transaction is equal to A) $500,000. B) $0. C) $20,000. D) $200,000.
If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then
a. U.S. net capital outflow rises which increases the U.S. exchange rate. b. U.S. net capital outflow rises which decreases the U.S. exchange rate. c. U.S. net capital outflow falls which increases the U.S. exchange rate. d. U.S. net capital outflow falls which decreases the U.S. exchange rate.