It can be shown that the Nash equilibrium would indicate that without any agreements, the best outcome for each large nation would be to:
a. not impose a tariff.
b. impose a tariff.
c. find other ways to reward their domestic firms.
d. impose a consumption tax.
Ans: b. impose a tariff.
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George and Michael can gain from exchange
A) unless one has an absolute advantage in all goods. B) if each specializes in the production of the good for which he has the higher opportunity cost. C) if each specializes in the production of the good for which he has the lower opportunity cost. D) unless they have different opportunity costs.
There is an adverse supply shock. In response the Federal Reserve pursues an expansionary monetary policy. Taking into account both the shock and the Federal Reserve's policy, which of the following are we sure of?
a. unemployment will be higher b. unemployment will be lower c. inflation will be higher d. inflation will be lower