A free trade area differs from a customs union in that
a. in a free trade area, members can establish their own tariff policies with respect to nonmembers
b. in a free trade area, the rules are binding on members, but in a customs union they are mere guidelines
c. a free trade area strives for low tariffs, but a customs union strives for high tariffs
d. a free trade area uses a standardized currency, but in a customs union each nation retains its own currency
e. the rules of a free trade area only apply to trade with nonmembers, but in a customs union the rules apply only to trade with members
A
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Refer to the above figure. If the aggregate demand curve shifts beyond AD5, which of the following would we NOT expect?
A) strong demand-pull inflation B) no increase in real Gross Domestic Product (GDP) C) strong and rapid increases in the price level D) increases in real net domestic product
The fact that severe fluctuations in inflation and unemployment are socially undesirable helps make the case for
a. a "hands off" policy by the government. b. fixed prices and wages. c. active government stabilization policy. d. restrictions on imports from low wage countries.