Fiscal policy:
a. Is a powerful tool because budget deficits add directly to Aggregate Demand with no offsetting changes in consumption, investment, and/or net exports.
b. May not be a powerful tool if most government expenditures are fixed and unchangeable in the short run.
c. Is not a powerful tool because the government has very little control over a nation's monetary base and/or money multiplier.
d. Is a powerful tool because of the decisive movements in the automatic stabilizers.
.B
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A firm's long-run average cost curve is
A) the locus of points representing the minimum unit cost of producing any given rate of output when all inputs may be adjusted. B) the locus of points made up of the minimum point on each short-run average total cost curve when only one input may be adjusted. C) the envelope of the firm's variable cost curves. D) identical to the lowest short-run average cost curve the firm has.
In the real world, we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is
A) comparative advantage works better in theory than in practice. B) because some countries also have an absolute advantage in the production of those goods. C) tastes for many traded goods are similar in many countries because of globalization. D) production of most goods involves increasing opportunity costs.