Which of the following observations is true of the principle of comparative advantage?
a. It arises from the absolute cost advantage.
b. It helps determine most efficient patterns of production.
c. It was advanced by Adam Smith.
d. It means producing a good using smaller quantities of resources than others.
b
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Which of the following is a result of a market economy?
A) voluntary exchange B) an equal income distribution C) agreement on equity D) environmental protection
To derive the external balance relationship under high capital mobility and floating exchange rates, an increase in government spending must be followed by
A) an increase in money stock to restore the balance of payments equilibrium. B) a decrease in money stock to restore the balance of payments equilibrium. C) a depreciation of the currency to restore the balance of payment equilibrium. D) a decrease in investment spending to restore the balance of payments equilibrium.