In the specificfactors model, suppose that a country has a comparative advantage in manufacturing output. Will workers be better or worse off following the opening of trade with other countries?
a. Workers will be better off because the nominal wage increases.
b. Workers will be better off because both nominal and real wages increase.
c. Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the real wage in terms of the manufactured good falls.
d. Workers may be better off or worse off because the real wage in terms of the agricultural good falls and the real wage in terms of the manufactured good rises.
Answer: c. Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the real wage in terms of the manufactured good falls.
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Look at the above figure. Suppose the economy was initially in equilibrium at point A. What point would represent the short-run equilibrium if the Fed makes an open market purchase of bonds?
A) A B) B C) C D) D
Suppose that Captain Canada can produce 100 hockey sticks or 10 gallons of maple syrup in a typical work week, while Captain Germany can produce 90 hockey sticks or 10 gallons of maple syrup in a typical work week. From these numbers, we can conclude
a. Captain Canada has a comparative advantage in the production of hockey sticks. b. Captain Germany has a comparative advantage in the production of maple syrup. c. Captain Canada has an absolute advantage in the production of hockey sticks. d. All of the above conclusions are correct.